The Bank of England pushed up interest rates to 5 per cent from 4.5 per cent on Thursday in order to quell inflation, a move which is set to cause more pain for mortgage holders.
While the bulk of mortgaged homeowners are on fixed-rate deals, meaning they will not immediately feel an impact but they will feel the “pain” when they come to remortgage, those on tracker mortgages will feel the immediate impacts of the 0.5 per cent increase.
Nicholas Wilson, 66, who is on a standard variable rate mortgage, said he is going to challenge his mortgage because he thinks “the whole thing is a scam”.
Mr Wilson is a mortgage prisoner, the term given to homeowners who typically took out a mortgage before 2008, whose mortgage was sold to an inactive lender, who have paid a high interest rate for 15 years, and now cannot remortgage because of the changed affordability tests.
He is now at a point where his mortgage equals his pension.
“Last year, my mortgage was about £440 (per month), it’s now over £900 – every time the bank puts the interest rates up, my mortgage goes up,” the anti-corruption campaigner, who lives in Hastings, East Sussex, told the PA news agency.
“I’m stuck in this mortgage and I obviously can’t go elsewhere. I do get donations from some of my followers, which just about tides me over, but that’s not going to be sustainable any longer.”
Mr Wilson was diagnosed with stage three prostate cancer in October of last year, which has required him to regularly go to the hospital for radiotherapy and said that while contending with cancer, he worries about dealing with potential repossession proceedings.
“I’m okay at this very moment we speak, but that will change very quickly within the next two months and then I’ll have to deal with it,” he said.
“I can’t contemplate repossession, I don’t know what I’d do if it came to that.”
“I can’t contemplate repossession”
He added that while he does not suffer with many effects from cancer treatment, his mortgage is a source of “constant worry”.
Asked about his thoughts on if the Bank of England’s decision to increase interest rates from 4.5 per cent to 5 per cent will have an impact on reducing inflation, he said: “No.
“[The Bank of England] has raised it 13 times now and it still hasn’t gone down.
“There’s going to be millions of people facing repossession… it’s just going to be a disaster.
“In my case, I’m going to challenge this mortgage because I think the whole thing is a scam.”
Mortgage payments triple
One 50-year-old accountant who lives in South Wimbledon, London, has seen his mortgage payments triple in the last three months.
For the last five years, he said he had been on a fixed-rate mortgage, which he came off about two months ago in favour of a variable rate.
“I gambled a bit, I work in financial services, and I thought interest rates were actually going to go down, so I went on a variable rate,” he told the PA news agency.
“The conclusion of that is my rates gone from 1.7 per cent to 5.1 per cent on a very modest terraced house in South Wimbledon.
“So it is quite remarkable.”
“The world has moved on”
He said that while he can “probably swallow that”, saying the price of paying rent on his street is “probably more than that”, he said “it’s a bit silly paying away a lot of money in interest”.
On whether he thought the 0.5 per cent increase would have an impact on reducing the rate of inflation, he said: “I don’t think this will have any impact on inflation.
“I’m an accountant and I know how things work.
“The world has moved on from everyone being on a variable rate.
“The true impact of the silly rate increase won’t be felt by all mortgage holders.
“It’s a small population that by pure luck, had to remortgage in the last few months, and in the coming few months, that will be adversely impacted, with absolutely zero impact on inflation.”
He added: “The fact that I pay three times more for my mortgage, that’s insane.
“I don’t see any logic in this.”
“Punishing London”
The accountant added that the base interest rate increase is “punishing London”.
“You know, you can buy a house for a week’s wages outside of the M25,” he said.
“While in London, house prices are three, four times more than the rest of the UK, so people are by nature, on higher mortgages, so by default, we’re punishing London people again.
“It doesn’t make any sense.”
The Bank of England hiked the base rate for the 13th time in a row on Thursday, and the accountant said he is “still trying to digest the impact” of the first rate increase.
“This thing takes 18 months to two years to work it’s way through,” he said.
“We’re still trying to digest the impact of the first rate increase, and we just keep on piling into it, it’s insane.”
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