"Millions locked into wrong mortgage"

From The Evening Standard:

As banks alter their lending criteria, millions risk being locked into the wrong mortgage.

A stream of mortgages have stopped buying flowers and have started coming home late reeking of booze, leading experts to warn hundreds of thousands of Londoners who are at risk of becoming "mortgage prisoners" to take action now. The term describes those who are trapped in abusive relationships with a mortgage which no longer loves them, in the wake of City watchdog the Financial Services Authority’s overhaul of the mortgage market set to be enforced next year.

Janice, 38, of Camberwell recounted her harrowing experience: "When I first settled down with my mortgage, it promised to help me up the housing ladder and to leave me plenty of money left over for buying food and paying the heating bills. But it's changed and we seem to have drifted apart. It comes home late, it takes nearly all my wages and it keep taking phone calls in the other room. It's just not the same any more, I really want things to go back to how they were but it's not interested, it just wants more every month."

Last week, a report published by the FSA’s advisory group the Financial Services Consumer Panel warned that the problem of mortgage prisoners — those trapped in a relationship with a violent or abusive mortgage — will be worsened by the new rules. The report warned: “The [Mortgage Market Review] proposals will potentially exacerbate this situation and increase the number of mortgage ‘prisoners’ — existing borrowers who will be unable to make a clean break and start a new relationship, despite the fact they require no extra borrowing and their personal circumstances have not changed since shackling themselves to the original mortgage.”

Brenda, 25, of Northolt continued: "I read all the brochures very carefully before signing up and all my friends told me how lucky I was. But my mortgage has been really abusive recently. At one stage I was on the verge of walking out but it said that if I did, it would hand over the keys to my flat to the bank and I'd never get back in again. It hasn't actually tried physical violence yet, but am very worried it will. I think perhaps my mortgage has got financial problems of its own, it once muttered something about having to hand over all my money to some people in The City."

The FSA has said nearly half of the 10.5 million homebuyers who took out a mortgage between 2005 and 2011 could be mortgage prisoners. Cheaper, interest-only loans promising sun, sea and sex were popular among borrowers but lenders grew lax about reminding homeowners that they had to love, honour - and most importantly obey, obey and obey - their mortgages until death do them part.

Janice, 41, of East Ham concluded: "I knew things hadn't been right for a while, but when I saw a photograph of my flat in the estate agents window with 'Public Notice of Auction' written above it, I realised it was all over. I've even seen my old mortgage flirting about with Betty from the nail bar, I'm sure she'll end up moving into my old flat with it. I just hope it doesn't beat her like it did me."

Many are likely to face a big jump in mortgage payments: someone with a £200,000 mortgage with 20 years left to run who is paying 4.5% interest will see their monthly payments jump from £750 to £1,265 per month if they switch from interest only to repayment. Either that or their mortgage will just go to court and have them evicted from their own homes.