UK political and financial elites have legitimised the marginalisation of “mortgage prisoners” by suggesting interventions were unfair, a report has found.
The paper, ‘The Stigmatised Homeowner’, by Matthew Sparkes, assistant professor at the University of Cambridge Sociology department looked at how the public discourse of political and financial elites, including MPs, regulators and Treasury officials, constructed the mortgage prisoner issue.
It specifically identified three themes, suggesting that elites downplayed distinctions between the mortgage books of active and inactive firms, differentiated prisoners by payment status, and invoked “moral hazard” to frame interventions as unfair.
“Crucially, these themes did not operate simultaneously — they emerged sequentially, each laying the conditions for the next,” Sparkes said.
Speaking on the first theme of downplaying distinctions, Sparkes pointed out that Conservative ministers engaged in this after 2016, emphasising that buyers had to agree to a package of customer protections.
One example offered by Sparkes was John Glen, MP for Salisbury and Wiltshire, who stated these rules prevented lenders from treating borrowers less favourably than similar customers by offering less favourable interest rates.
The paper gave further examples of Harriet Baldwin MP who argued that inactive firms would fear losing customers to other providers and Glen emphasising state aid rules prohibited new rates among UK Asset Resolution-owned mortgages.
It also mentioned UKAR chief executive Richard Banks stating that returning loans to the private sector would give borrowers access to “new deals, extra lending, and fixed rates”.
“Together, these moves formed a discursive practice that normalised minimal distinctions between active and inactive firms, legitimising continued privatisation, open markets, and foreclosing alternative policy responses,” the paper suggested.
Payment status
The paper also pointed out that, from 2018, elites started to publicly recognise regulatory impacts on closed-book borrowers but that “semantics” shifted following the Financial Conduct Authority’s Mortgage Prisoners Review.
While identifying around 195,000 households with mortgages owned by inactive firms, the review segmented them into distinct “cohorts” with mortgage prisoners being redefined as one cohort of 47,000 households up to date with payments.
This excluded households near the end of term and those in arrears.
“While political elites initially minimised distinctions between active and inactive firms, from 2021 they leveraged FCA segmentation to solidify disparities within closed-book borrowers, making payment status a defining element,” the paper said.
Moral hazard
Finally, the paper suggested that elites framed mortgage prisoners as the victims of a “moral hazard” to justify not intervening in the issue, describing it as “key discursive strategy tied to notions of fairness”.
It explained that the concept of fairness became a part of political elites’ toolkit for rejecting a raft of proposed solutions, including the cap on SVRs.
As an example, Sparkes pointed out that Glen articulated that any solutions for borrowers with inactive firms must avoid unfairly penalising consumers in the wider mortgage market or disadvantage those aspiring to obtain a mortgage.
Sparkes concluded that mortgage prisoners occupy a “paradoxical” position in the UK housing market as they are homeowners but their “discursive marginalisation” demonstrates how moral judgment operates not only across tenure lines, but within them.
tom.dunstan@ft.com
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