MPs urge FCA to cap standard variable rates

The APPG is calling for a market-wide margin cap of 2% above the Bank of England base rate on all standard variable rates to provide "immediate and effective relief" to mortgage prisners.

Its research found that a customer with a £130,000 repayment mortgage with Heliodor on the SVR of 4.39% will be paying £11,846 a year, compared to £9,967 a year if they could access a good value fixed rate mortgage.

A customer with a £120,000 interest-only mortgage with Tulip/Grasmere on the SVR of 4.39% will be paying £5,268 a year, compared to £2,280 a year if they could access a good value fixed rate.

A customer with a £150,000 interest-only mortgage with Mortgage Agency Services on the SVR of 5.35% will be paying £8,025 a year, compared to £2,850 a year on a fixed rate.

The APPG says that with the outbreak of Covid-19, any hopes of mortgage prisoners remortgaging onto better rates quickly is "all but extinguished".

In a statement, the APPG said: "For those trapped with unregulated funds and inactive lenders such as NRAM, Heliodor, Landmark and Mortgage Agency Services there is no opportunity for a lower rate. It is unconscionable that hundreds of thousands of homeowners - many of whom bought high-street, prime mortgages from a regulated lender - have all been sold or had their mortgage transferred into a position from which they have no escape.

"This has become even more apparent in the light of the Covid-19 pandemic. The recent survey by UK Mortgage Prisoners highlights the catastrophic personal consequences that these rates are having on key workers, many of whom have been risking their lives, that are trapped on high SVRs.

"It is time that we say enough is enough and take clear, decisive action to alleviate the ongoing harm that is being inflicted on key workers and other mortgage holders across the country. We cannot applaud their service on the one hand, whilst allowing this level of injustice to continue with the other."

Seema Malhotra MP, co-chair of the APPG on mortgage prisoners, commented: “Too many mortgage prisoners have been exploited by being held on high standard variable rates or have seen their rate increased with no justification. The CMA and the FCA should intervene quickly to cap the interest rates being charged. The coronavirus has led to unprecedented strain on family finances and we need to help mortgage prisoners, including many key workers, get a better deal.”

Kevin Hollinrake MP, co-chair of the APPG on fair business banking, added: “It is simply unfair that hundreds of thousands of UK individuals, couples and families are locked out of a mortgage market that the rest of us take for granted. Even if lenders were following the new guidance on the affordability test, the FCA admits that this will only help a small fraction of mortgage prisoners. A cap on the SVR is the simplest and quickest way of addressing this injustice.”