Financial Services Bill — Before Clause 1 — Interest Rates for Mortgage Prisoners — 26 Apr 2021 at 20:45

The majority of MPs voted against capping mortgage rates for those with a mortgage contract with unregulated, unauthorised or inactive lenders and whose circumstances mean they cannot switch to a different lender.

MPs were considering the Financial Services Bill.^[1][2]

The motion supported by a majority of MPs in this vote was:

• That this House disagrees with Lords amendment 8

Lords amendment 8^[2] began:

• Insert the following new Clause—
• “Interest rates for mortgage prisoners
• (1) The Financial Services and Markets Act 2000 is amended as follows.
• (2) After section 137FD insert—
• “137FE FCA general rules: interest rate for mortgage prisoners
• (1) The FCA must make general rules requiring authorised persons involved in regulated mortgage lending and regulated mortgage administration to introduce a cap on the Standard Variable Rates charged to mortgage prisoners and to ensure that mortgage prisoners can access new fixed interest rate deals at an interest rate equal to or lower than an interest rate specified by the FCA.
• (2) In subsection (1)—
• “mortgage prisoner” means a consumer who cannot switch to a different lender because of their characteristics and has a regulated mortgage contract with one of the following type of firms—
• (a) inactive lenders, or firms authorised for mortgage lending that are no longer lending; and
• (b) unregulated entities, or firms not authorised for mortgage lending and which contract with a regulated firm to undertake the regulated activity of mortgage administration;
• “new fixed interest rate deals” means the ability for the consumer to fix the rate of interest payable on a regulated mortgage contract for periods of 2 years and 5 years;
• “Standard Variable Rate” means the reversion rate which is a variable rate of interest charged under the regulated mortgage contract after the end of any initial introductory deal.

Explanatory notes to the Lords amendments^[3] stated:

• Lords Amendment 8 would insert a new clause that requires the FCA to make rules imposing a cap on the Standard Variable Rates charged to borrowers with inactive lenders or unregulated entities who cannot switch providers because of their financial circumstances. It would require that the cap must be set at a level no more than 2 percentage points above the Bank of England base rate. It would also require the FCA to make rules that would enable mortgage prisoners with certain characteristics to access new fixed-term interest rate deals. Lords Amendment 8 requires the FCA to specify the rates offered on these deals for a range of Loan-To-Valuation ratios taking into account the average 2 year and 5 years fixed rates offered to existing customers with active lenders through product transfers. The amendment places a duty on the FCA to make such rules no later than 31 July 2021.

FCA is a reference to the Financial Conduct Authority.^[4]

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• [1] Parliament's webpage on the Financial Services Bill, Parliament.uk
• [2] Lords amendments to the Financial Services Bill, 21 April 2021, Parliament.uk
• [3] Explanatory notes to the Lords amendments to the Financial Services Bill, 21 April 2021, Parliament.uk
• [4] Explanatory notes to the Financial Services Bill, Parliament.uk

Debate in Parliament |