Martin Lewis: Stop handing mortgage prisoners "life sentences" - MSE News

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The sale of mortgages to unauthorised and inactive lenders is giving some mortgage prisoners a "life sentence", MoneySavingExpert.com founder Martin Lewis has warned Treasury Minister John Glen...
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'Martin Lewis: Stop handing mortgage prisoners "life sentences"'
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  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    Martin told the panel that whilst selling off these mortgages might "help the Government's balance sheet", it is "shafting" those who are borrowing them, to applause from the audience.

    Taxpayers will foot the bill. Not the Government. Why should I pay for the many in which other people handle their financial affairs?

    Martin of all people should know that magic money trees don't exist.
  • Teamocil
    Teamocil Posts: 122 Forumite
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    Thrugelmir wrote: »
    Taxpayers will foot the bill. Not the Government. Why should I pay for the many in which other people handle their financial affairs?

    Martin of all people should know that magic money trees don't exist.

    The government should be either selling these mortgages back into lenders who actually offer a proper range of mortgages or administering them themselves. Either way, I'm failing to see where the Treasury loses out? What exactly are they footing the bill for?

    Selling big loans to the highest bidder, regardless of its impact on the borrowers, is absolutely appalling.
  • TheShape
    TheShape Posts: 1,781 Forumite
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    If these mortgages are held by people who cannot pass affordability tests they are effectively sub-prime mortgages. What mortgage lender will buy those mortgages and put the mortgage holders on a cheaper deal without wanting to acquire the mortgage at a hefty discount?

    Either you expect mortgage lenders to take on these riskier mortgages without pricing for the risk or you sell at a discount with a cost to the taxpayer.

    Not sure this campaign makes sense.
  • Rosemary7391
    Rosemary7391 Posts: 2,879 Forumite
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    Whilst it totally doesn't make sense that they cannot remortgage to a cheaper deal for the same amount if lenders are willing to lend otherwise, I'm not sure how this is a life sentence..? Surely once they've paid off enough they'll be able to remortgage? I guess it might take a few years and that's no fun, but it should be possible?
  • VT82
    VT82 Posts: 1,079 Forumite
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    While Martin's argument has merits, it is being rather over-egged.


    When you take out a mortgage, it says what will happen during the incentive period, and what will happen thereafter. There is never a guarantee that alternative products will be available to switch to after, and there never has been. As long as people taking over mortgages are adhering to the Ts and Cs as written, the borrower can't really complain. They won't be locked in after their incentive ends, and if they can't find another lender who'll have them, well that's not the fault of company that owns the mortgage.


    The Mortgage Credit Directive being unfair on mortgage prisoners is kind of irrelevant; lending criteria changes all the time - buyer beware.
  • ViolaLass
    ViolaLass Posts: 5,764 Forumite
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    VT82, I understand your argument but I hold that it is immoral to trap people in this way. Now the government knows, they cannot ethically continue to do this.
  • eddddy
    eddddy Posts: 16,526 Forumite
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    edited 4 October 2018 at 11:24AM
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    VT82 wrote: »
    ...and if they can't find another lender who'll have them, well that's not the fault of company that owns the mortgage.

    I think the argument is it's not a case of "another lender" refusing to take them for commercial reasons...

    ... it's the new MMR rules introduced by the regulator in 2014 that prevents another lender from offering them a mortgage.


    i.e. Before 2014 this group of people could potentially get mortgages and re-mortgages (perhaps with no problem).

    But after 2014 the regulator's new rules stopped them getting re-mortgages (or new mortgages) - so they are stuck with whatever lender and deal they happened to have in 2014.
  • smala01
    smala01 Posts: 154 Forumite
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    The simple fix would be to legislate that lending criteria are waived if the new product provides for cheaper monthly payments... Simples. Lenders can then assess the risk and determine if they want the customer on a commercial basis.


    The key here is to remove the legislative burden as it makes no sense in this context as it penalises those its meant to protect.
  • kingstreet
    kingstreet Posts: 38,788 Forumite
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    eddddy wrote: »
    I think the argument is it's not a case of "another lender" refusing to take them for commercial reasons...

    ... it's the new MMR rules introduced by the regulator in 2014 that prevents another lender from offering them a mortgage.


    i.e. Before 2014 this group of people could potentially get mortgages and re-mortgages (perhaps with no problem).

    But after 2014 the regulator's new rules stopped them getting re-mortgages (or new mortgages) - so they are stuck with whatever lender and deal they happened to have in 2014.
    No. It's EMCD.

    The October 2012 FSA Transitional Rules bypassed the MMR leaving lenders the freedom to exercise judgment in applying affordability checks. The EMCD stopped that.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • antrobus
    antrobus Posts: 17,386 Forumite
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    Teamocil wrote: »
    The government should be either selling these mortgages back into lenders who actually offer a proper range of mortgages or administering them themselves. ...

    Who administers a mortgage is irrelevant. Do you understand what that means?

    In any event, as far as UKAR is concerned, Martin is being a bit of a plonker. UKAR doesn't offer new mortgages either. So if they sell a book of mortgages to someone else, nothing changes.
    Teamocil wrote: »

    Either way, I'm failing to see where the Treasury loses out? What exactly are they footing the bill for?

    Selling big loans to the highest bidder, regardless of its impact on the borrowers, is absolutely appalling.

    I think you've answered your own question. :)

    P.S. There is no impact on the borrowers.
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