A new report from the research unit at LSE London ‒ funded by MoneySavingExpert founder Martin Lewis ‒ suggests that mortgage prisoners should receive more comprehensive information about precisely who owns their mortgages, the regulatory status of those owners, and what consumer protections are in place to help the prisoners.

It also calls on the Government to fund independent debt counselling organisations to provide holistic financial advice, separate to mortgage-specific advice, and for the services of these organisations to be more clearly signposted to mortgage prisoners.

The report identifies a range of more long-lasting measures which could help to address the existing mortgage prisoner problem, but suggests they need a full, in-depth assessment by the Government using the comprehensive data about the prisoner population and their loans which is held by the regulators and others within the financial services industry.

These measures include:

• The Government offering equity loans to mortgage prisoners, helping them bring down the loan-to-value (LTV) of their existing mortgage, and allowing them to remortgage elsewhere on the open market.
• Decoupling the two secured and unsecured loan elements of Northern Rock’s old Together mortgage. Under the old terms and conditions of the loan, doing so could trigger a “sharp rise” in the interest charged on the unsecured portion.
• Having some of the loan written off by investors ‒ perhaps with Government incentives ‒ followed by a Government equity loan.
• Mortgage rescue, where those for whom mortgages are financially unsustainable are allowed to remain in the property as tenants, with the home sold to a housing association.
• Bringing owners of closed books within the FCA’s regulatory perimeter, meaning greater oversight of their practices.
• Cap very high standard variable rates on closed book loans.

Kath Scanlon, distinguished policy fellow at LSE London, noted that measures taken by the Government after the global financial crisis had made mortgage lending less risky, but had also contributed to the current mortgage prisoner crisis.

She continued: “Our research aimed to understand the range of circumstances facing mortgage prisoners and identify solutions so more of them can reduce their payments and/or restructure their mortgage arrangements and keep their home, and we found a strong case for fully investigating a wider variety of solutions. We hope our work contributes to a long-lasting solution for these borrowers.”