Money saving expert Martin Lewis renewed his call for the government to step in and help 200,000 mortgage prisoners who are trapped on high rates.

In an open letter to the new chancellor Rachel Reeves, MoneySavingExpert.com’s founder Lewis urges her take action where the previous government failed to do so.

He writes: “I know you’re aware of the plight facing mortgage prisoners – the 200,000 trapped in high-interest mortgages, after the state sold their loans on to uncompetitive, sometimes unregulated lenders. 

“The prior administration promised, but didn’t deliver, a response to the reports I commissioned from the LSE, which included costed solutions. “Please can your team pick up this work? 

“Many in your party have championed it. The financial, mental and physical toll on those trapped has led to repossessions, hardship and, terribly, suicide.”

The plea comes as a group of mortgage prisoners represented by law firm Harcus Parker took their class action to the High Court this week.

In his letter to the chancellor, Lewis also calls for an update to “unfair” rules on Lifetime Isas to allow more first-time buyers to benefit.

He says: “LISAs haven’t kept up with the times, and many, especially in south-east England, are now finding themselves fined when they use their own savings towards their first property.

“The £450,000 house price limit has been frozen since LISAs launched in 2017.

“Average house prices in England have risen over 27% in that time.

“In 26 of 32 London boroughs, first-time buyers’ properties now average £450,000+.

“To withdraw for any purpose other than buying a qualifying home (or from aged 60), you pay a 25% penalty (which includes roughly 6.25% of the saver’s own funds).

 “This means many who have saved in a LISA to build a deposit, as the state encouraged them to do, now face paying the Government a fine simply to access their money to buy a first-time property – as they’re now priced out and it’s above the threshold.

“On £20,000 saved, the 25% bonus added 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 the chancellor should allow first-time buyers who are buying a property over £450,000 to withdraw money from their LISA to use as a deposit without getting the bonus but without being fined either,

To do this the government could reduce the withdrawal penalty from 25% to 20%, so savers would get back what they put in plus any interest. 

He adds: “Of course, index-linking the £450,000 house price limit would help too.”

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