Money saving expert Martin Lewis reiterated his call for the Government to step in and help 200,000 mortgage prisoners trapped in high interest rates.
In an open letter to new Chancellor Rachel Reeves, MoneySavingExpert.com founder Lewis urged her to take action where the previous government failed to do so.
He writes: ‘I know you are aware of the fate facing mortgage prisoners – the 200,000 people trapped in high-interest mortgages after the government sold their loans to uncompetitive, sometimes unregulated lenders .
“The previous government promised a response to the reports I had commissioned at the LSE, but that did not happen. These also include priced solutions. “Can your team please take up this work?
“Many in your party are in favor of it. The financial, mental and physical toll on those incarcerated has led to seizures, deprivation and, terribly, suicide.”
The plea comes as a group of mortgage prisoners is represented by law firm Harcus Parker filed their class action with the Supreme Court this week.
In his letter to the Chancellor, Lewis also calls for an update to the “unfair” rules on Lifetime Isas so that more first-time buyers can benefit.
He says: “LISAs have not kept up with the times, and many, especially in South East England, are now fined if they use their own savings on their first property.
“The £450,000 house price cap has been frozen since the launch of LISAs in 2017.
“Average house prices in England have risen by more than 27% in that time.
“In 26 of London’s 32 boroughs, first-time buyer properties now cost an average of £450,000+.
“If you wish to withdraw for a purpose other than purchasing a qualifying home (or from age 60), you will pay a 25% penalty (which includes approximately 6.25% of the saver’s equity) .
“This means that many who saved in a LISA to build up a deposit, as the state encouraged them to do, now face having to pay a fine to the government simply to access their money to make a first home – because they are now priced too high. and it is above the threshold.
“On the £20,000 saved, the added 25% bonus is £5,000, but the withdrawal penalty is £6,250, so they end up with £1,250 LESS than what they put in.”
But Lewis says there is a simple solution.
He argues that the Chancellor should allow first-time buyers buying a property worth more than £450,000 to withdraw money from their LISA to use as a deposit without getting the bonus, but also without being fined.
To do this, the government could reduce the withdrawal penalty from 25% to 20%, so that savers get back what they put in, plus any interest.
He adds: “Of course indexing the £450,000 house price cap would also help.”