The family of a vicar’s widow has accused the Church of England of behaving like a loan shark after a £55,000 mortgage it granted became a £313,000 debt – on top of monthly payments she has been making for almost 30 years.
Tessa Norris* says her 84-year-old mother, Rose, has “devoted her life to the church, all on a voluntary basis” but that it is treating her, and others in a similar position, “as commodities to make money”.
Rose and her late husband were among those who signed up for an “equity sharing” mortgage scheme offered to retiring clergy between 1983 and 2008. It enabled those who had moved from vicarage to vicarage, never owning their own property, to become homeowners in later life.
But where it differed from standard home loans was that, in addition to charging the borrowers interest payments, the church was guaranteed a set percentage of the property’s value at the time when it was eventually sold.
Soaring house prices over the past few decades mean that, for those retired clergy or family members still holding one of these mortgages – it is not clear how many people that is – this has turned out to be an incredibly expensive way to buy a home.
In this case, as things stand, the original £55,000 looks likely to end up costing £400,000 or more. That is arguably not a good look when the archbishop of Canterbury, Justin Welby, famously declared war on payday lenders and predatory lending practices.
The church has so far declined the opportunity to step in to offer Rose a deal, or write off the loan as a goodwill gesture. It says borrowers have always had the option to refinance with other providers, or pay down the original loan.
The family got in contact after reading a Guardian report in December about shared appreciation mortgages sold by Bank of Scotland that had ballooned into huge debts.
Norris’s late father, a vicar, retired in the early 1990s, and, in 1995, the couple took out the equity-sharing mortgage offered by the Church of England Pensions Board, which provides retirement services to those who serve, or work for, the church.
They used the loan to buy a “modest” four-bedroom terraced home in Crawley, West Sussex, where Rose still lives.
Norris says the purchase price was about £66,000, and the loan the couple got, on which they paid interest only, was for £55,000 – about 83% of the price.
When Norris started helping her mother manage her affairs, she was keen to find out more about the loan. In her initial exchanges with the board last autumn, it indicated it would cost Rose about £60,000 to pay off the mortgage. That was because, it said in an email, that her equity share was 83.3%.
But a few weeks later, Norris was told this was an error and that the equity share was actually less than 17%. As a result, said an email, the amount Rose would have to hand over to settle the mortgage was just under £300,000.
At the end of January this year, Rose’s mortgage statement arrived, confirming the bad news. It said that because her house was worth an estimated £375,000, she would have to hand the board £313,000, assuming the property sold for that price.
To add insult to injury, a few weeks later, she received another letter saying that her monthly interest payment would rise by 6.7% from this April to £452, after a 10.1% increase in April 2023.
“My mum was bewildered by how much she owed. She has devoted her life to the church, all on a voluntary basis, and doesn’t understand this – she thought she still owed £55,000,” says Norris. “She has held the church in such high esteem that it’s very hard for her to imagine that they would do something like this.”
Norris says her mother has made monthly interest payments for almost 29 years. These are taken directly from her church widow’s pension.
The starting interest rate was 4%, and the most recent paperwork gives a figure of 8.4%. The official Bank of England rate is now 5.25%. It is not clear how much interest has been paid in total since 1995, but if it averaged £250 a month, it would be well over £80,000, and it could be considerably more than that.
Norris adds she believes it is “appalling” that the church repays its ministers, and those who have devoted their lives to it, in this way. “I have related this story to colleagues, and the most common phrase I get back is ‘loan sharks,’” she says.
Observer Cash forwarded the financial information about the loan, plus the family’s claims, to the Church of England. In a statement, it did not directly address how the loan has operated, or the amount that Rose would have to pay.
The board said: “These mortgages were designed to offer retired clergy the chance of home ownership at a time when they were unlikely to have been able to take out mortgages elsewhere.”
It added: “Interest rates were in the double digits for much of the 80s, and very high into the early 90s, putting home ownership beyond the reach of many. Meanwhile, the starting interest rates on these mortgages was typically about 3% or 4%, and increases in mortgage payments were limited to the increase in clergy pensions to support long-term affordability.
“The arrangement was more like renting than buying, but with some of the upside if the property gained in value. Retirees have always had the option to refinance with other providers – and the option of paying down the original loan, reducing their monthly payments and increasing their share of the property’s value.”
* Names have been changed
