"We need an inquiry so we can allocate responsibility and examine the mistakes within Government and regulators that caused the very bad situation for thousands of mortgage prisoners. "
- Lord Sharkey
Lord Sharkey has written to the Serious Fraud Office to request an investigation into the treatment of mortgage prisoners by Mortgage Agency Services Number 5, which was part of the Co-operative Banking Group.
This comes as the Mortgage Prisoners Inquiry Bill, which would establish an independent inquiry into the circumstances surrounding the treatment of mortgage prisoners and the policies of the Government, FCA and Financial Ombudsman Service (FOS), receives its Second Reading in the House of Lords today.
Mortgage Agency Services Number 5 (MAS5) increased the standard variable rate (SVR) four times over the period 2009 to 2012. It claims that each of these rises was necessary to reflect changes in the cost of funding the mortgages.
An investigation from FOS has found that “the evidence doesn’t show that there were changes in the overall costs MAS5 was liable itself to pay for the funds that it used” and “as a result the changes to the SVR MAS5 made between 2009 and 2012 – which collectively added 2.76% to the SVR – were not made for reasons permitted by the contract”. The conclusion is clear that “the evidence shows that MAS5’s cost of funding did not increase”.
Sharkey says the conclusion from FOS seems to be different to what MAS5 customers were told. For example, in February 2011 the letter sent by MAS5 said that the SVR increase was “a direct reflection of the increased costs of funding your mortgage loan”. In April 2012, the letter said that the SVR increase had been made after “careful consideration” and that the “rate we are charged for funding your mortgage has increased considerably”.
This analysis also confirms a provisional FOS decision from June 2020, where the FCA and FOS allowed the Co-operative Bank to stop a customer from discussing the unfair SVR increases by requiring them to sign a confidentiality agreement to settle their complaint.
Lord Sharkey said: “We need a full investigation by the Serious Fraud Office into the conduct of Mortgage Agency Services Number 5 and the Co-operative Banking Group and the statements they made to customers to justify the increases in the standard variable rate.”
During the debate on the Second Reading of the Mortgage Prisoners Inquiry Bill, Lord Sharkey will also ask the new Labour Government when they intend to respond to the LSE Report which was funded by Martin Lewis and contained a series of costed proposals to help mortgage prisoners.
Following the 2024 general election, Martin Lewis wrote to Chancellor Rachel Reeves in July 2024 asking for the new government to respond to the LSE report. Lewis said the “financial, mental and physical toll on those trapped” as mortgage prisoners had led to “repossessions, hardship and, terribly, suicide”. At the time of writing, the government has not publicly responded to the letter.
The Mortgage Prisoners Inquiry Bill proposes to establish an inquiry which would examine yhe actions of the Conservative Government in selling the mortgages of former Northern Rock customers to vulture funds and inactive lenders, the policies and practices of the FCA, and the handling by FOS of complaints made by mortgage prisoners
Lord Sharkey said: “We need an inquiry so we can allocate responsibility and examine the mistakes within Government and regulators that caused the very bad situation for thousands of mortgage prisoners.
"We need an inquiry to identify and correct any failures at the FCA and the FOS and correct any miscarriages of justice which may have occurred.
"Most of all, we need an inquiry to develop and implement solutions for the current generation of mortgage prisoners; to help them stay in their homes and stop them from being exploited by vulture funds.”
