Rishi Sunak was urged to address the plight of so-called mortgage prisoners rather than play “catch up” as elements of the situation were compared to the Post Office-Horizon scandal.

The group known as mortgage prisoners saw their lenders collapse in the 2008 financial crisis and have since been trapped on high rates, unable to switch due to toughened borrowing criteria.

The Prime Minister said: “It’s not an easy situation to fix overnight, but there are things being looked at as we speak.”

He was speaking at Prime Minister’s Questions after being challenged by SNP MP Martin Docherty-Hughes (West Dunbartonshire) to address the issue.

Mr Docherty-Hughes said: “While there has rightly been much attention paid to the Post Office-Horizon scandal, there is another shocking example of Government and private sector collusion that began under the last Labour administration and continued under the Tories.

“Almost 200,000 mortgage prisoners who borrowed with high street lenders such as Northern Rock have become trapped after the portfolio was sold off to foreign entities like Topaz Finance and Heliodor, who have been creaming off extortionate revisionary standard variable rates, essentially since 2008, leaving even those who kept up with payments in danger of having their home repossessed.”

He said those affected have had their dream of homeownership “taken away from them”, adding: “So can the Prime Minister, instead of playing catch up like he is doing with the Post Office scandal, meet with me and campaigners to discuss what more can be done for mortgage prisoners?”

Mr Sunak said: “I am familiar with the situation for mortgage prisoners.”

He said it was something he worked on when chancellor and the Treasury and Chancellor Jeremy Hunt “have been engaging with campaign groups and others to find ways to resolve it”.

“It’s not an easy situation to fix overnight, but there are things being looked at as we speak.”

Affected borrowers entered into loans with lenders that subsequently failed and then have often been rejected when applying for cheaper mortgages because they do not meet toughened criteria brought in following the 2008 crisis.

Many have loans that were sold by the state to so-called closed book inactive lenders, often investment companies that are not regulated to lend new mortgages, making it difficult for borrowers to move to cheaper rates.

The Financial Conduct Authority (FCA) said in 2021 that around 195,000 mortgage holders were in closed books, with around 47,000 deemed mortgage prisoners – by the FCA’s definition, they are up-to-date with payments but cannot switch even if it would benefit them.

The remaining number at that time, according to the FCA, either had not yet tried to switch mortgages, were unlikely to benefit from doing so, or have not kept up-to-date with payments and so were unable to switch.