“Mortgage prisoners” trapped in home loans they cannot escape have suffered heart attacks, strokes, depression and even died of suicide as a result of the stress of their situation, a survey has revealed.
Campaign group UK Mortgage Prisoners action group polled 170 of its members who had been forced to pay far in excess of market rates on home loans taken out before the financial crash because of government changes to lending affordability rules.
Many face imminent repossession of their homes even though they would have been able to pay off their mortgage if they were not being overcharged, the group said.
The survey responses detailed harrowing experiences in a number of cases, and will heap further pressure on government ministers and the financial watchdog to act.
One respondent wrote: “My husband had a stroke few years after getting mortgage.” This forced the person to switch to an interest-only mortgage to afford the repayments.
“Every time I get up to date, they [the mortgage company] add charges. I now owe more than [I borrowed] and been paying for 12 years. Felt at times about ending it all but not fair on my kids as it’s hard since their dad had a stroke and brain tumour.”
The most commonly reported problems were severe depression, anxiety, issues with sleeping causing exhaustion and fatigue, mental breakdown, panic attacks and mood swings.
Others said they felt mentally drained, overwhelmed and permanently in a state of worry, with little control and no way out.
For some, the consequences have been significantly more serious.
I’m sitting here cold as I cannot afford any heating ... no life whatsoever, just a struggle each day
“It has caused me anxiety and my doctor put me on antidepressants ... I had a heart attack due to stress,” one respondent said.
“My husband walked out on me and my children as he couldn’t take the pressure anymore, so I had to bring up the children on my own whilst trying to pay the mortgage, which is interest only. I am sitting here freezing cold as I cannot afford any heating, no holiday for eight years, no life whatsoever, just a struggle each day.”
The person summed up the situation that many mortgage prisoners feel trapped in: a change in circumstances causes them to struggle to afford their high-interest repayments but the mortgage company will not let them move to a cheaper deal, or in some cases even downsize to a more affordable house while paying the same rate.
“I asked to port my mortgage to a smaller house when my husband walked out but I was denied.
“I can’t move, I am stuck with a huge interest rate, which I am paying each month, but cannot afford a lower interest rate! The whole family are suffering!”
Another mortgage prisoner wrote: “It has caused a death, my mother has suffered a stroke and my brother is severely depressed and unable to work.”
It has caused a death, my mother has suffered a stroke and my brother is severely depressed and unable to work
Prescriptions for antidepressants are a common theme running through a number of responses: “It’s been a difficult time for our family, my wife is now on medication for depression.
“The stress of being trapped in a mortgage and struggle to manage monthly has had a devastating impact.
“My sister who was in a similar position, her marriage ended as her hubby couldn’t manage financially. She sadly commit[ted] suicide in June. We have no doubt the mortgage mess they were in played a huge role in her mental health deterioration.”
Five people who filled out the survey said they had contemplated taking their own lives.
In a report detailing the survey’s findings, UK Mortgage Prisoners said many people feel they are sitting on a “ticking time bomb” as their mortgage terms come to an end.
The companies then became “zombie” lenders, meaning they could no longer offer new loans.
What is a mortgage prisoner?
A mortgage prisoner cannot leave their current mortgage, often because changes to lending rules mean they no longer meet strict affordability checks.
Mortgage prisoners are moved to lenders’ ‘Standard Variable Rates’ once their deals expire. SVR rates are typically well in excess of the market rate at around 5 per cent. So mortgage prisoners are effectively told by banks and building societies that they cannot afford a cheaper loan than the one they are currently paying for, even if they have never missed a payment before.
Some mortgage prisoners can remortgage with their current bank or building society but for an important group this is not possible.
Around 200,000 people who took out mortgages with Northern Rock or Bradford & Bingley before the financial crisis are trapped. Those defunct lenders were bailed out and the government took on the loans via holding companies.
The holding companies were not authorised to lend money so couldn’t offer new mortgage deals to customers. The government then sold on the mortgages to private companies which are not authorised, leaving many people with no option but to accept high rates and charges.
When customers’ deals came to an end their rates were increased to so-called standard variable rates, well above the market rate, and remained there for years.
Strict new lending criteria meant that borrowers were not allowed to switch. A significant number of mortgage prisoners are stuck on interest-only mortgages, meaning they have not been able to pay off much of their loan.
Many mortgage prisoners have overpaid by tens of thousands of pounds over the past 12 years compared to the payments they would have made on a typical interest rate.
Once the mortgage term finishes, many on interest-only deals also risk losing their homes, even though they would potentially have been able to pay off their loan in full if they were paying the market rate.
Mortgage prisoners feel particularly aggrieved because most of the hundreds of millions of pounds they have collectively overpaid went to government-owned companies set up to take on Northern Rock and Bradford & Bingley’s home loans.
The government then sold them on to private companies which, under the terms of the sale, are allowed to unilaterally raise rates without consulting customers.
Last year, the Financial Conduct Authority (FCA) introduced new rules designed to help mortgage prisoners, allowing lenders to use a different and more proportionate affordability assessment for customers who meet certain criteria.
But the changes will only affect around 6 per cent of mortgage prisoners. The FCA says it is powerless to intervene in the loans bought up by vulture funds because the companies involved are not regulated mortgage lenders.
Lenders have also shown “little appetite” for helping homeowners trapped on high interest rates, the FCA said last week.
But a campaign for justice is also building as mortgage prisoners come together, having realised they are not alone in their situation.
More than 500 people joined Mortgage Prisoners UK’s Facebook group in the first week of this year and specialist solicitors Harcus Parker launched legal action last month against the companies that now own the Northern Rock and Bradford & Bingley loans.
A copy of the survey report is to be handed to the FCA ahead of a meeting between the regulator and representatives of UK Mortgage Prisoners next month.