Teacher’s mortgage payments have nearly doubled from £680 to £1,250 a month
A mortgage prisoner stuck on a high interest loan has seen her monthly payments double to £1,250 as a result of recent rate rises.
Teacher Arifa Salam, 55, has had an interest-only mortgage on her home in Birmingham since 2003 but as a result of successive Bank of England interest rate rises, is now paying a rate of 9 per cent. The average two-year fixed rate is currently 6.83 per cent.
Since December 2021, when rates were just 0.1 per cent, the Bank of England has upped the base interest rate 14 times to the current 5.25 per cent.
Although she stopped working in June for health reasons, Ms Salam has worked multiple jobs over the years to cover her mortgage payments. She said: “I took on two, three jobs at a time constantly over 20 years. I had time away from my kids.
“It was hard and I’m paying for all the extra work and all the extra hours now. I have problems with my hips, the C-word [cancer] has come up. All the stress I’m sure has contributed.”
Ms Salam is a “mortgage prisoner” – one of around 195,000 people who took out unfavourable high-interest or interest-only mortgages with lenders before the 2008 global financial crisis or shortly afterwards before lending restrictions were tightened. Many of those lenders no longer offer mortgages or have since folded entirely, leaving mortgage prisoners stuck.
They are effectively being held hostage by the mortgages they are on and unable to get a new mortgage deal because they do not meet current lender criteria, due to factors such as their age, income, or credit score.
In 2003, Ms Salam took out an interest-only mortgage with Northern Rock. During the 2008 financial crisis, when the bank was bailed out by the British Government, she was transferred to NRAM and is now with Heliodor – where her mortgage rate has risen to almost 9 per cent.
In the past two decades, she has been taken to court and her house was nearly repossessed as a result of failing to keep up with payments, she said.
The situation over the last year has worsened. Ms Salam has gone from paying £680 per month in August last year, to £1,250 a month now.
“I borrow from family constantly. I’m 55 years of age and I’m borrowing money. I can’t even afford my own funeral at the minute,” she told i.
She speaks to her lender almost daily and said she has tried everything to move on to a lower mortgage rate but due to her credit rating, she has been unsuccessful, she said. “They won’t lend any more money, they won’t extend the term, they won’t lower the interest rate.
“I got myself into a really weak credit status, no one will lend me anything, I’ve tried everywhere.”
The nature of her interest-only mortgage means she still owes the full amount of her £175,000 loan.
“I’ve not paid, in 20 years of graft, a single penny of the mortgage. Some days I just sit and sob. I was only in my early thirties [when I bought the house].
“All my life has been making sure my kids are alright and fed and clothed. I’ve never been looking after myself.”
Ms Salam is due to have surgery in September. She’s worried about her health when she returns to work. “At the moment I have got to keep going to pay this damn mortgage.
“I want to retire, I’m ill. I’ve got a disease. I need to be healed but I can’t, I have to keep working.”
At least 13 lenders out of 82 have reduced mortgage rates this week, offering tentative signs that pressure on homeowners may be beginning to ease as competition returns to the market.
Halifax, the UK’s largest mortgage lender, has reduced rates by up to 0.71 percentage points today, with a five-year fixed deal priced at 5.39 per cent, down from 6.10 per cent.
NatWest has followed suit, reducing selected two and five-year fixed rates by up to 0.65 percentage points from today. HSBC, Nationwide and TSB have already cut rates this week.
Mortgage experts welcomed the news as evidence that the crisis may be turning a corner, but warned that rates are unlikely to return to the lows seen earlier this year.
