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Mortgage prisoner trapped paying over £1,800 per month and facing another rate rise

A woman who is trapped paying over £1,800 per month on a variable rate mortgage for a flat she cannot sell said she and her family are “at the mercy” of the Bank of England as it prepares to raise interest rates again.

The Bank of England’s Monetary Policy Committee will meet next week to decide whether to raise interest rates again, with economists widely expecting a 0.25 percentage point increase to 5.5 per cent.

If predictions are correct, it will mark the 15th consecutive rise to the base rate since interest rates started going up in December 2021.

An increase to the base rate will have an immediate impact on the roughly 1.32 million British households on tracker and standard variable rate (SVR) mortgages.

Data provided to i by the trade body UK Finance found that average interest rate on a tracker mortgage is likely to hit 6.45 per cent in this scenario, while the average SVR is likely to hit 7.75 per cent.

Among those worst affected by the rate rise will be those trapped paying variable rate mortgages for various reasons.

This includes ‘mortgage prisoners’ who took out deals with lenders that collapsed during the 2008 financial crisis, as well as those who have been left unable to remortgage due to the post-Grenfell cladding scandal.

Psychologist Lisa Smith is one of thousands of people across the UK trapped on a variable rate mortgage to pay for a flat she cannot sell due to fire safety issues.

She and her husband, an architect, purchased a two-bedroom flat in Greenwich, London in 2013.

They discovered their building has various safety defects when they tried to sell two years ago to relocate to Finland.

Ms Smith and her husband have been renting out the property to cover the cost of the mortgage, but their mortgage costs suddenly shut up this month when their fixed rate deal came to an end and they were moved onto their bank’s SVR mortgage.

Their bank will not let them sign up to a new fixed rate deal and no other provider will lend to them due to the cladding issues.

As a result, their monthly payments have increased from £1170 per month to £1804 per month and the rent they receive no longer covers the cost.

And their monthly payments are set to increase further if the Bank of England increases its rate next week.

“It just makes us feel sick…it’s happening so frequently and obviously because there’s still a lot of uncertainty in the economy it just feels like we’ve got no control. We’re just at the mercy of whatever they decide and we’ve got no choice in the matter at all,” she said.

“We’re renting currently in Finland because we can’t buy anywhere,” she said. “With the rising cost of service charges and insurance and everything else that goes along with the fire safety, and a potentially massive bill to do the remediation that’s required, we are massively out of pocket financially. The interest rate is just the final nail in the coffin.”

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