Man trapped on 6% mortgage sells items on eBay to keep up with his payments
Homeowners stuck on expensive mortgages fear losing their homes after the government rejected their pleas for help.
After weathering the struggles of the pandemic, many are now suffering further financial hardship.
Many say their mental health has suffered and some even fear divorce.
These “mortgage prisoners” took out home loans in the days of easy credit before the financial crash of 2007.
Subsequently, the financial regulator increased the financial barriers to taking out a mortgage loan.
These backfired on many existing landlords, who found they could not abide by the new rules and the mortgage at the end of their transactions.
This has forced them to pay inflated payments on their lenders’ standard variable rates – which come into effect after a mortgage ends.
Now a group called UK Mortgage Prisoners fear many people are on the verge of losing their homes as the government ban on repossession ended earlier this month.
Rachel Neale, campaign manager at UK Mortgage Prisoners, said: “Repossessions are happening. So many people have lost their jobs or become ill. They can no longer afford the amount of money they paid . Some have attempted suicide.”
The group has written to City Minister John Glen asking for an extension of repossession leave for mortgage prisoners. But this week, Glen said no.
His letter read: “While this issue is unfortunately complex, I nevertheless remain committed to this issue and to determining whether practical and proportionate solutions can be found for borrowers with inactive businesses.”
We spoke to two mortgage prisoners who now fear losing their homes – both who wish to remain anonymous in case going public worsens their problems.
“I sold my things to pay my bank”
One is a 51-year-old paramedic, who says he worked 60 hours a week to pay his mortgage for the past decade.
He bought a house in 2003 near Cambridge and in 2006 secured an interest-only mortgage from lender GMAC.
In 2007 he obtained a rental mortgage on a second property in Cambridge.
Then the financial crash of 2008 changed everything. His mortgage was taken over by a lender called Mortgage Agency Services Number 5, or MASS No.5, which is part of the Co-op Bank.
He was unable to remortgage and at times paid a monthly rate of 6%, now 5.35%. But the average mortgage rate in April was 2.02%, according to Bank of England data.
Some home loans cost less than 1%.
Struggling under the weight of reimbursements, in 2019 he had a car accident and was hospitalized.
He said: “I was paying my mortgage from a hospital bed. I was selling things on eBay to pay my mortgage.”
Then the pandemic hit. The mortgage prisoner, who has a weakened immune system, could not work.
He was granted a six-month mortgage payment holiday as the Financial Conduct Authority (FCA) ordered all lenders to allow this to anyone requesting it.
But that ended, and he now fears being taken back.
His lender calls him, texts him or sends him a letter every week asking for payments, which he describes as “very stressful” and “absolute vulture” work.
Perhaps trying to be helpful, her lender even gave her money-saving tips to help her pay – including shopping at cheap supermarkets.
He is uncertain about the future, but believes talks with his lender have reached an impasse and he has decided his mortgage is not viable.
Are you a Mortgage Prisoner? Contact firstname.lastname@example.org
A Co-op Bank spokesperson said: “The Co-operative Bank recognizes the challenges faced by customers who may be considered mortgage prisoners and we are continually looking for proactive ways to support them.
“We remain committed to providing support to our customers and welcome the introduction of any further regulatory initiatives on this issue.”
“The bank could take my house”
The second mortgage prisoner, 56, is the director of a small software company and lives in the North Leeds area.
He fears repossession if his lender doesn’t let him refinance the arrears he’s fallen into – which he thinks they may not do.
He is married with two children, but has not informed his wife of the seriousness of the situation and fears she will divorce him if he does.
He took out a mortgage with failing lender Northern Rock in 2007, paying a decent – for the time – rate of around 4%.
His mortgage was then transferred to NRAM, the government-owned lender that took over Northern Rock’s mortgages when it went bankrupt.
He then sold his mortgage to Heliodor Mortgages, owned by a company called Computershare.
The inmate, a cancer survivor, pays a rate of approximately 4.19%.
“It’s very stressful, it’s not easy, and sometimes I think ‘it’s my fault,'” he said.
But the burden of high monthly payments of around £1,000 a month means he is in arrears of around £12,000.
He said the mortgage was “a massive proportion of my take home pay”.
To make the repayments, the prisoner fell into a spiral of debt.
Some months he won’t pay utility bills in order to make mortgage payments, then switch the next month, which he admits is “like robbing Peter to pay Paul.”
He wants the arrears added to the mortgage as part of a refinance deal, but says Heliodor has so far failed to respond to his request.
He thinks repossession is on the cards.
The prisoner said: “I can’t tell you how stressful it is – it’s a nightmare. I call them ‘Hell’s Door’. I know other mortgage prisoners, especially single women, are in a very difficult situation, but sometimes I feel really depressed about it.”
A spokesperson for Heliodor said: “We have written to all of our customers who could benefit from a change in lender to clearly outline their options.
“We are not placing any unnecessary restrictions on those wishing to switch loans, and we will also be waiving any prepayment charges for customers with fixed-term mortgages who have elected to switch to another lender.
“Creating a payment plan tailored to an individual’s needs can help ease the financial pressure on borrowers, and we offer a range of forbearance options for customers who are struggling.”
Uncertain future for mortgage prisoners
There is no immediate hope for many prisoners facing repossession outside of individual talks with their banks.
The FCA is doing a review of mortgage prisoners to try to better understand their situation and will report back by November.
Earlier this month, a proposed cap on SVRs was enshrined in legislation called the Financial Services Bill by the House of Lords.
This would have limited the amount paid by mortgage prisoners, but was defeated in the House of Commons.