A mortgage prisoner "just about getting by" has spoken of his concerns over rising interest rates and the looming cost involved in buying back years on his lease.
Mike Judge, a father-of-three who is a pastor in a small suburb on the outskirts of Manchester, became a victim of the fallout of the financial crisis in 2007-2008.
His lender Northern Rock collapsed, before being taken over by the government, then split into the 'good' and 'bad' bits and sold off.
Unfortunately for Judge, his small flat in Newcastle, which had been mortgaged by Northern Rock, had fallen into negative equity.
Therefore he, like thousands of others, ended up in the 'bad book' of mortgages under Northern Rock Asset Management, which was subsequently parcelled up and sold off.
He has been stuck in the portfolio of mortgages NRAM transferred to Heliodor Mortgages. Heliodor Mortgages is a trading name of Topaz Finance Limited, which is owned by the Compushare Group.
Like thousands of mortgage prisoners whose properties are in negative equity, he has been hit by subsequent rate rises and although the Bank of England held rates steady at 5.25 per cent in September, his current interest rate is 8.48 per cent variable.
By the time Judge pays off the outstanding balance of £86,000, he will have paid off approximately double the amount he originally borrowed in 2007 - £95,000.
On top of this, he has a low number of years left on the leasehold, which means even if he can repay the outstanding balance in eight years' time, he faces approximately a bill of £20,000 just to extend the lease to make it appealing to buyers.
How it started
Judge said: "In 2006 I took out a ’Together’ mortgage with Northern Rock. I borrowed £95,000 at an interest rate of 6.49 per cent (five years fixed rate).
"My mortgage broker at the time was Henry F Dodds of Newcastle upon Tyne.
"It was the right advice at the time. I had a steady job in Newcastle, I had no 'bank of mum and dad' to help me, little savings and no way of getting onto the property ladder.
"The broker said I could get a 100 per cent, interest-only mortgage with Northern Rock and it all went through fine."
He said he had no complaints about the broker, because there was no way anyone could have foreseen the events of the financial crisis.
The broker told FTAdviser: "Mr Judge wanted to get on the property ladder as he had recently moved to the North East of England.
"As he didn’t have funds to provide a deposit the only option was a 100 per cent mortgage to progress.
"There are obviously risks associated with a 100 per cent mortgage and these were all highlighted in a letter to Mr Judge in a letter dated August 2 2006, before the mortgage completed."
