Seema Malhotra MP, who is also co-chair of the All Party Parliamentary Group on Mortgage Prisoners, has called for Government intervention to provide support for consumers who have been described as the “forgotten victims of the 2008 financial crash” by consumer champion Martin Lewis.

Mortgage prisoners are trapped with their current lenders, which are often inactive or not authorised to offer new products, leaving many paying higher rates than they would otherwise need to. They are often rejected when they apply for cheaper mortgages because they do not meet toughened borrowing criteria brought in after the 2008 financial crash, even if they are keeping up with repayments. In 2020, Mr Lewis estimated that the UK had around 250,000 mortgage prisoners.

Ms Malhotra said "The situation for mortgage prisoners is getting worse every single month due to the relentless rise in standard variable rates and the refusal of vulture funds and inactive lenders to offer mortgage prisoners new deals or fixed rates. Many mortgage prisoners are in a perilous situation as they were already suffering from a cost of living crisis and high energy bills. We hope the Government will support an amendment to the Financial Services Bill to cap SVRs for mortgage prisoners and force inactive lenders to offer them fixed rates."

A Government spokesperson said: “We understand that this is a difficult time for millions of mortgage holders across the country, with interest rates rising in response to global shocks, such as Putin’s invasion of Ukraine.”

The spokesman said the Government was delivering on its plan to provide economic stability and had also taken steps to update mortgage lending rules, removing the regulatory barrier that prevented some mortgage prisoners, who otherwise may have been able to switch, from accessing new products. The Financial Conduct Authority’s review into mortgage prisoners found that there are 47,000 mortgage prisoners who might benefit from switching to a new mortgage deal but are considered too high risk to do so, despite being up to date with payments, according to the Government.

The statement added: “The review makes clear that the reason mortgage prisoners are unable to switch are varied and complex. As such, there is no single measure to address the circumstances of this entire population of mortgage holders without being unfair to other borrowers. We have already worked with the FCA to implement changes to its mortgage lending rules, removing the regulatory barrier that prevented some mortgage prisoners, who otherwise may have been able to switch, from accessing new products. These rules should allow customers to switch to an active lender as long as they meet the lender’s risk appetite and certain criteria, such as not looking to borrow more.

“Ultimately, the pricing and availability of mortgages is a commercial decision for lenders in which the Government does not intervene. As such, we cannot force lenders to lend to borrowers that sit outside of their risk appetite. We remain open to practical and proportionate solutions to help mortgage prisoners that do not pose unacceptable financial stability risks, and are not unfair to other borrowers in the mortgage market.”

Vulture funds are placing Britain's mortgage prisoners in peril, says Shadow Minister for Business and Consumers