Up to 40,000 Scots who are locked in as “mortgage prisoners” are calling for government action to help them in the wake of the latest interest rate rise.
People all across the country have been paying hundreds of pounds more on interest on their mortgages since the 2008 financial crash.
Some are now at risk of losing their homes as they haven’t been able to pay off their loans by the end of the term while others are struggling to feed their families as they are paying every penny to clear their debts.
An SNP MP is to debate the issue in Parliament this week - the first time it has been raised - and will call for UK Government ministers to help free them from their current contracts.
Clydebank MP Martin Doherty-Hughes said people in his constituency have suffered badly as a result of the 2008 financial crash and the handling of mortgage contracts by the UK Government.
He said: “I have constituents who are now going to be left destitute and some are going to be homeless.
“One of my constituents had a letter telling them their rate will now be 12.7 per cent. These are middle to low-income families, they work hard and will be reduced to extreme poverty.
“People have lost their homes or forfeited them already.
“Some have actually paid most of their mortgage value but in only interest and still have in excess of £200,000 left to pay. They will lose their homes.
“The Tories and Labour are complicit in this. It has been a failure of successive governments and that’s what I’ll be challenging them about on Wednesday.”
The MP said he would be calling for the current government to free those mortgage prisoners from their current contracts and allow them to switch lenders.
Around 250,000 in the UK are estimated to be mortgage prisons after the collapse of Northern Rock and Bradford and Bingley in 2008.
They became trapped with their current mortgages when laws were tightened up after the 2008 financial crash.
They had mortgages with banks which went bust during the crisis and the UK Government bought their loans.
The mortgages were then sold on to firms called ‘closed-book lenders’ - firms which appear as if they are mortgage companies but do not actually offer any mortgages and instead they take payment from home owners for the contracts they bought from the government.
Some people have been paying 8-12 per cent interest on their loans for years as they can’t move from the closed-book lenders.
If they want to swap to a new lender they have to pay solicitors fees and home valuation fees which many can’t afford and they are often not eligible for a mortgage due to the government tightening up the rules.
Sam Dixon, 59, from Coupar in Fife has been struggling to pay her mortgage since 2008 and is considered a mortgage prisoner.
She bought her home in 2004 for £86,000 and had been paying her Northern Rock mortgage at 4.14 per cent interest.
Since the bank collapsed and the government took over the loans she has had 13 interest rate rises and now paying 7.99 per cent but expects it to rise further with the announcement this week.
Her mortgage has been bought by three different closed-book companies in the last 15 years but none of them offer a different rate and she can’t afford solicitor’s fees or house valuation fees to switch lenders even if they did offer her a new deal.
Sam, a facilities manager and a youth worker, said: “I work two jobs at the moment and every hour I can. About half of my income every month - £650 - goes to the mortgage. I can’t go on holiday, or afford to fix anything in my house. I have a cooker that doesn’t work and two of the rings are broken.
“I can’t get my windows fixed and the place is falling apart. I use food apps like Too Good To Go where I can get cheap food, rarely buy any new clothes or anything like that.
“At Christmas time my mum, whose a pensioner, will give me money to buy a Christmas dinner for the family so we can at least have that.”
Sam, a single mum of three, said she was stuck when Northern Rock collapsed in 2008 and her mortgage was taken over by the government.
At the time she tried to find a better deal but was told nobody would lend to her as the government had tightened up the rules on who could get a mortgage.
She said: “When other lenders saw I had been with Northern Rock it was almost like a black mark, they’d just say you have to go elsewhere.
“I was only contracted to work 24 hours a week but in reality I was doing 36 or more as I was trying to pick up as many extra bits and pieces as I could.
“But because my salary for mortgage purposes was based on that 24 hours a week in my contract they said I couldn’t afford a mortgage.
“I had three kids who were all living at home and I just had to keep paying the mortgage at this high rate and that’s what I’m still doing.
“I’ve been trying to over-pay even if it means I can’t do anything like holidays or fix the house just so I can get out of this.
“That’s also caused problems though because again if I go to another lender they look and say ‘You are paying too much and you can’t actually afford to pay that much on your mortgage’.”
Sam said she is hoping to pay the remaining £7,500 on her mortgage in the next two years but now fears the latest interest rate rise will mean she can’t manage it.
She said: “The alternative is just to sell the house and try to get another one. I’ve spoken to my daughter about it as she is renting, so we may have to do that but I don’t know if we would be approved.
“The UK Government has a lot to answer for and they’ve really done nothing up to this point to help anyone.”
Martin Lewis, the money saving expert, has previously called for the UK Government to step in and fix the problems created in 2008.
He said the issue had “huge mental and physical health consequences” for those affected and said “It’s time to end this situation and give these people the mortgage freedom they deserve.“
The UK Government was contacted for comment.
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