BoE changes
FTAdviser was curious why Bank of England rate rises in 2022 and 2023 were applied to mortgage prisoners, given by this time it was clear this cohort had a significant proportion of vulnerable and debt-ridden individuals, and the UK was in a well-documented cost-of-living crisis.
Generally, SVR rates are applied to all mortgages that are subject to SVR increases in line with a lender's terms and conditions, although the FCA has been keen to make sure that lenders have a number of forbearance measures in place to support customers.
A spokesperson for The Co-Operative Bank said: "When the BoE makes announcements to change Base Rate we consider how to respond to that change and a number of factors inform our decision.
"In several previous instances we have either not passed the Base Rate increases to customers, or have significantly reduced the impact by not passing it on in full.
"We continue to review the pricing of our full mortgage range across all brands, including securitised/closed book mortgages, and will communicate with customers should there be a change to mortgage pricing as a result of a movement to base rate."
The spokesperson added: "We have a number of forbearance measures in place to help vulnerable customers and customers who are unable to make their monthly mortgage payments.
"Specialist agents within our mortgage support team will tailor any support to a customer’s specific circumstances. In the case of Mr and Mrs L, this includes accepting lower payments while the exit strategy (to sell the property) continues.”
Case precedent
Government ministers and the all-party parliamentary group on mortgage prisoners have called for action to help release these households from the burden of debt, as reported by FTAdviser.
Regulators and ombudsmen alike have also been involved in dealing with cases.
In April, the Financial Ombudsman Service told FTAdviser they are dealing with "hundreds" mortgage prisoner of cases, which are often very complicated and take time.
The Fos has ruled on previous cases, for example in 2018, a Mas5 consumer complained to Mas5/The Co-operative Bank about the interest on her mortgage.
She escalated this to the Fos in December 2018.
The Fos decided that could investigate the complaint about the interest rate that MAS5 applied to Mrs Davies’ mortgage from October 2012.
This would be within the six-year rule that applies to complaints.
But as part of this investigation, the Fos also confirmed that it would review the history of Mrs Davies’ mortgage from the time it reverted onto the standard variable mortgage rate in January 2009.
MAS5 applied for a judicial review of the FOS’s decision to consider the rates applied to the mortgage prior to October 2012, on the ground that this decision was an error of law and goes back further than the jurisdiction of the FOS permits.
