An Open Letter to UK Chancellor Rishi Sunak: Britain has up to 2 Million ‘Mortgage Prisoners’

CC – UK Prime Minister Boris Johnson.

Britain has up to 2 Million ‘mortgage prisoners’ in increasing financial stress through no fault of their own, a situation created, paradoxically, by bad, outdated regulation. 

There have already been 7 attempted suicides in the UK Mortgage Prisoners Group alone, so far. Two of which succeeded.

Yet the profiteering and evictions at the hands of ‘Vulture Capitalists’ continue, despite the fact that a solution is now at hand. Awaiting only, as the Financial Conduct Authority (FCA) CEO and Bank of England Governor designate Andrew Bailey made clear yesterday, final Treasury signoff for the changes to create a fully regulated, crowdfunded #PeoplesMortgage – which has been seven years in the making. 

Prime Minister Boris Johnson has promised to ‘Level up’ the Mortgage Prisoners. Now the ball is in the hands of new Chancellor Rishi Sunak as he prepares his budget for next week.

Dear Chancellor,

As the budget approaches I’d like to draw your attention to a matter of great urgency for a large number of people who you can help deliver from ongoing and extreme mental and financial anguish with a stroke of your pen – and at no cost to the public purse whatsoever.

Also saving many of these families from the threat of eviction from their homes by unscrupulous unregulated mortgage lenders – who, incidentally, came by their mortgages under false pretenses – or at the very least promises that were never capable of being fulfilled.

Indeed it’s arguable that the government owes this help at the very least to the most hard-pressed mortgage prisoners, the exchequer having benefited to the extent of £5 billion at their expense according to this week’s Times report.

Living Under Threat of Eviction – Because of Government’s Behavior

Through no fault of their own 40,000 households are paying on average three or four times as much as they should be, had the mortgage not been sold out from under them, exposing them to vulture capitalism.

Many are set for eviction in the coming weeks because of highly questionable actions by a previous government. Many more are under this threat and in great hardship.

  “The mortgage prisoners situation is a result of government action and needs to be put right. It’s hard to fathom the depth of  the hardship and distress being experienced by these people who have been caught in the middle through no fault of their own. Clearly the traditional lending market is failing them, badly.

We are also well aware of the underserved market – especially self-employed, small business owners and freelancers. Gone are the days, particularly the young, where one can expect a job for life with one company. The government needs to free the shackles of the lender market by encouraging innovative ways of lending, such as the  #peoplesmortgage.”

Paula Higgins, CEO, UK HomeOwners Alliance

In 2015 the then government sold several mortgage books – including those of Northern Rock and the Bradford and Bingley Building Society – to a consortium of rapacious investors led by the aptly named Cerberus Capital Management.

Dold to Cerberus: The Hellhound

Cerberus, you will recall from your mythology was the two-headed hellhound who savaged lost souls. So the government of the day can have been in no doubt what, and who, it was dealing with. The National Audit Office report confirms that the sole objective was to achieve the highest possible price. Hence the fact that HMT has benefitted to the tune of £5Billion from this £13Billion deal. A profit made by disregarding any duty of care to citizens, selling their mortgage loans from under them and away to an unregulated lender who now overcharges to an astonishing degree and takes opportunities as they arise to default the loans wherever possible (because that locks the prisoner into the debt to them, restricting or denying availability of credit from other sources) allowing them to evict virtually as the choose in pursuit of yet greater profits.

At Risk: All Our Mortgages and Homes

Having agreed their mortgage with a reputable, FCA regulated, high street lender it will come as a severe shock to ordinary UK mortgage borrowers that it is even possible for our mortgages to be sold from under us, without any consent or even knowledge, to an unregulated, unscrupulous offshore lender who has no reputation to uphold and therefore no incentive to behave even reasonably – let alone in the way a regulated lender would be expecting and required to.

In addition to this, a massive oversight on the part of the FCA when new rules were introduced has placed more than a million, possibly as many as 2 million, households at similar risk of eviction over the coming years – 40,000 or so of them this year alone. 

While it is understandable the FCA may seek to limit and discourage the use of interest-only mortgages, for obvious reasons, they have – so far – been unable to provide a solution for the hundreds of thousands of people and households for whom the clock is ticking – and who are now ‘imprisoned’ – without one.

Not for the ant of Trying

Although it’s not for the want of trying! As Andrew Bailey who is governor designate for the Bank of England and outgoing CEO of the FCA yesterday made 100% clear to the Treasury Select Committee the FCA have done all they can do – the matter is now in your hands at the Treasury.

There is a solution in the wings for both these classes of mortgage prisoners which the FCA has been working on and can now be activated by completing the process, long overdue, started back in 2015: The creation of a non-bank mortgage: A Crowdfunded Mortgage!

Crowdfunded Mortgage: A Powerful Solution Available Now… Almost!

Everything is in place – almost: It has been put in place over the last 7 years. The relevant permissions have been granted by the FCA – but now await signoff of the final piece to resolve a purely technical issue. As FCA CEO Andrew Bailey yesterday made clear in Parliament he/they remain keen to have resolution and the matter now rests with Treasury – with your officials, and so in your hands.

Resolution at Hand

While we fully understand that in the run-up to a budget the pressures are high for any chancellor, let alone a new one, this is not a difficult case, or indeed a small one. However, what happens next is crucial for not only your reputation as Chancellor but for this government as a whole.

Ongoing Harm: Ravaged Mental Health, Possible Eviction & Financial Ruin

The detriment, right now, to hundreds of thousands of people and households is not just to their finances but to their mental health too. Indeed the two and a half thousand strong, growing,  UK Mortgage Prisoners group, who have sought to support mortgage prisoners, have documented 7 suicide attempts, of which 2 were successful – so far. They are now documenting the ongoing harm to the children of these families and their parents.

The detriment’ is imminent and extreme for a great many people – is it not just a matter of money and cannot be rectified after the fact – the fact being ravaged mental health, possible eviction and, likely in many cases, financial ruin.

The ‘Detriment’ is Imminent and Extreme

It is in your power, at no cost to your budget or the taxpayer and no ‘detriment’ to anyone – other perhaps than Cerberus’s excessive demands and profits – to put the final brick in the wall, remove the final barrier to the creation of what has become known as the #PeoplesMortgage, designed to be people, rather than bank, centric, and could help so many people and alleviate their suffering – not to mention all the resulting harm from here on in.

Not to mention that it would also help large numbers of the self-employed and others who remain out in the cold – unable to be offered a mortgage.

I appeal to you to consult with the FCA and complete the final signoff this much-needed regulation* without delay – your reputation, and that of this government rests upon what happens next.

Barry E James is co-founder of the Campaign, co-chair of the Westminster Frontier Technologies Forum, founder The Crowd Data Center.

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