UK government made £2.4bn from ‘mortgage prisoner’ loan sales, says Martin Lewis

theguardian.com:

The UK government made a £2.4bn “profit” when it pushed tens of thousands of mortgage borrowers “into poverty” after selling their loans on to new lenders, the campaigner Martin Lewis has claimed.

The MoneySavingExpert founder was speaking at the launch of a report, which he funded, into the plight of so-called “mortgage prisoners”: a group of borrowers caught up in the fallout from the 2007-08 financial crisis.

Many originally took out their home loans with lenders that had to be rescued during the crisis, including Northern Rock and Bradford & Bingley, and subsequently had their mortgages sold on to providers that did not offer new deals – leaving some trapped on high interest rates and unable to move to a cheaper product.

However, the number of people who fall into the category of mortgage prisoner appears to be disputed. MoneySavingExpert has suggested the number is 200,000. However, in late 2021, the Financial Conduct Authority said that while there were an estimated 195,000 households whose debts had been sold on to “inactive” lenders, the number “who are mortgage prisoners” was 47,000.

These people were up to date with payments, but unable to switch because either their mortgage or their circumstances would deter a lender.

The new report from the London School of Economics and Political Science (LSE), commissioned by MoneySavingExpert, claimed that Office for Budget Responsibility documents confirmed that “the taxpayer has substantially recovered all actual and opportunity costs suffered,” and indicated that the sale of the loans to inactive lenders “had generated a £2.4bn surplus”.

It added: “It might well be argued that this gives sufficient headroom to allow government to step forward and help struggling borrowers.”

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