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Mortgage Prisoners Trapped in High Interest Contracts Fight Back

Thousands of UK borrowers ‘imprisoned’ in high-interest mortgages due to the nationalisation of their lenders are mounting a fight back against those responsible. As many as 150,000 homeowners have found themselves locked into high-interest loans, with no option of switching to a cheaper deal.

A group lawsuit is now being filed by the UK Mortgage Prisoner Action Group, with some of its members looking to claim tens of thousands of pounds in excess interest repayments. While the Treasury has insisted its commitment to “removing barriers” to provide access to cheaper deals, those affected by the scandal have labelled the issue “a disgrace”.

Unacceptable Interest Rates

The lawsuit filed by the UK Mortgage Prisoner Action Group comes in the wake of thousands of mortgages taken out in the late 2000s being privatised following the collapse of Bradford & Bingley and Northern Rock. Some of those affected have reported paying an APR in excess of 5% on their mortgages for at least 12 years, with no option to switch to a better deal. Work out the costs of a mortgage using our UK mortgage calculator

This amounts to more than twice the interest being charged on equivalent mortgages by several major lenders during this time. One member of the group who spoke to the BBC stated that his mortgage interest rate has been locked at around 7%, resulting in tens of thousands of pounds in additional interest payments.

Like many, his mortgage was taken over by Northern Rock Asset Management (owned by UK Asset Resolution) following the downfall of Northern Rock. As his debt no longer exists as a mortgage in the traditional sense, the option of switching to a better deal with a new lender is not currently available.

Properties Repossessed

The fightback against those responsible is being fronted by Damon Parker, partner at Harcus Parker solicitors. Speaking with the BBC on Wednesday’s Victoria Derbyshire program, Mr Parker said that it is the obligation of those who now manage the collapsed banks’ debts to offer their customers a competitive deal.

“We say that our clients have been unfairly treated because they’re paying too much… at a time when every other mortgage customer is paying unprecedented low rates” he said.

“It’s not fair to charge people just because they are collateral damage caught up in a nationalisation. Some people have got into terrible financial situations. Some people have been repossessed.”

A joint effort by the Treasury and the Financial Conduct Authority is said to be underway to help those affected access more affordable deals. However, it will ultimately be up to the banks and building societies themselves to agree to take over their mortgage debts.

Other Finance News

How Labour and the Conservatives Plan to Tackle the Housing Crisis

Both the Tories and the Labour Party have outlined in their respective manifestos how they plan to tackle England’s housing crisis, should they be successful in this month’s election. 

For the Conservatives, Boris Johnson has promised to build at least a million homes over the next five years, while introducing new measures to help first-time buyers get on the property ladder. 

“We believe in home ownership. We think it’s the right way forward,” he said.

Meanwhile, Jeremy Corbyn has said that Labour is committed to the most extensive affordable housing scheme in more than 50 years, which will see at least 100,000 new council houses built by 2024.

“Many families are in sub-standard accommodation, paying huge amounts of money for it,” said Labour’s Angela Rayner, adding that the Labour Party would take more direct control of affordable housing in the UK.

Along with 100,000 new council houses, Jeremy Corbyn also promised to build a minimum of 50,000 “genuinely affordable homes” each year, which would be made available through local Housing Associations. Prices would also be adjusted on a regional basis across the UK, in accordance with average local incomes.

Labour’s pledge – which would result in the biggest social housing initiative being implemented since the 1960s – was welcomed by housing charity shelter.  However, the Institute for Fiscal Studies warned that if enacted, the new policy could “risk cannibalising what’s going in the private sector”.

Upping the Ante for Affordable Housing

Clearly a sticking point for votes heading into the December election, affordable housing has become a prime talking point for both primary political parties.  Labour in particular has taken its affordable housing promise to the next level, having previously stated in 2017 that 100,000 council houses or housing association homes would be built each year. They have now stepped this up to 150,000 new homes annually.

Labour’s ambitious promise comes at a time of a growing skills shortage in the UK construction sector, making it difficult to see how these 150,000 affordable homes would be built each year. Such a project would call for an extensive programme of training or the recruitment of a small army of construction workers from overseas.

Over with the Conservatives, the Tory Party has stated that unlike Labour, it would not use public funds to build the promised one million homes over the next five years. Instead, initiatives and incentives would be introduced to motivate the private sector to build more affordable homes across England.

They also spoke of a new programme that would give first-time buyers looking to purchase a property in their area a discount of 30%.

“The Conservatives have always been the party of homeownership, but under a Conservative majority government in 2020 we can and will do even more to ensure everyone can get on and realise their dream of owning their home,” said Mr Johnson.

“At the moment renting a property can also be an uncertain and unsettling business, and the costs of deposits make it harder to move. We are going to fix that.”

Should the Liberal Democrats win at the December election, the party has promised to build 300,000 new homes in England within the next five years, which includes a minimum of 100,000 social homes.


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