In less than five years, the 56-year-old Navy veteran will be forced to sell or have his family’s three-bedroom home in Preston, Lancashire, repossessed.
Nearly 20 years later, the Shackletons owe more than they originally borrowed and are stuck paying an interest rate of more than 8 per cent.
These people, like Spencer, are stuck paying high variable rates, often damaging their finances so badly that they cannot remortgage or move to a new lender. Through a complex chain of financial deals, their loans have often been repackaged and sold on to companies that won’t offer cheaper rates.
He was told by Northern Rock that his mortgage would automatically revert to repayment after six months. But before that could happen, Northern Rock collapsed.
“I was told to stay put; it didn’t even occur to me to try another lender and move my mortgage,” he said.
Mortgage prisoner Spencer Shackleton outside his home in Preston
He didn’t want to scare his family as their mortgage payments rose, so he “covered up” how serious their situation was.
Mortgages sold to ‘highest bidder‘
Unlike most homeowners, Spencer cannot remortgage and choose a lower, more affordable rate with another lender. His credit rating has been damaged by his mortgage, and due to the Shackletons’ combined income of around £48,000, a regular bank or building society is unlikely to approve a mortgage which would allow them to keep their home.
Landmark is owned by a US-based private equity firm, Cerberus Capital, which purchased Northern Rock loans from the UK government.
The deal meant the taxpayer received about £5.5 billion and Cerberus took on a mortgage book worth approximately £8 billion, despite not being a lending bank authorised by the Financial Conduct Authority (FCA).
How the government deal left homeowners exposed
When the British government nationalised Northern Rock, they created a closed-book lender called Northern Rock Asset Management (NRAM) to manage its loans. NRAM was overseen by another government-owned company called UK Asset Resolution (UKAR). Loans held under NRAM and UKAR were then sold off to various buyers.
They said: “If I make a loan to you for £100, that loan would normally be worth £100. But, if the loan becomes bad, and I think you’ll stop making payments on it, I could sell it.”
The lawyer made clear there was nothing “inherently wrong” with the government’s decision to sell NRAM to Cerberus.
“But if [companies such as Landmark] are aggressively collecting debt, then that’s another matter,” they added.
A Landmark spokesperson said it “sought to engage” with Spencer “on many occasions” and insisted “all attempts at contact and help” were “ignored or rejected”. Spencer denies this.
No government intervention
In 2009, the then Labour government wanted to give the FCA’s predecessor, the Financial Services Authority (FSA), more power over the sale of mortgages to ensure anyone buying or managing a mortgage loan book would be regulated. However, this never happened. Reports from 2013 show the coalition government’s economic secretary, Sajid Javid, “torpedoed” proposed measures to support mortgage prisoners, as there “was not sufficient evidence of consumer detriment taking place to justify additional regulation”. In 2021, Lord Sharkey, a Liberal Democrat member of the House of Lords, tabled an amendment to the Financial Services Bill which would have given the FCA new powers to cap the interest rate that mortgage prisoners like Spencer are charged and ensure that they would be offered fixed interest rates, but the proposal was opposed by the Conservative government and voted down in the House of Commons.Customers treated ‘unfairly’
In the report, MPs noted Landmark customers were being charged higher interest rates than mortgage holders elsewhere.
Spencer says he has complained to Landmark, the FCA and the Financial Ombudsman several times about his mortgage rate.
“I wrote to the FCA and the Ombudsman about this. They both ruled in favour of Landmark in my complaint.”
Spencer believes mortgage prisoners should be entitled to financial support.
“We are in this situation because we were put here by the government who sold off our mortgages to the highest bidder.”
An FCA spokesperson said they “appreciate the difficult position that some borrowers in closed books find themselves in” and will “continue to support government and industry as they consider any further potential options to help borrowers in closed books.”
“We have already seen some firms operating closed products act to ensure they are ready to comply.”
A spokesperson said: “This Government recognises the challenges that mortgage borrowers who are unable to switch to a new mortgage deal face.
Sajid Javid was contacted for comment.
Cerberus declined to comment.
Landmark says rates are ‘fair’
A spokesperson for Landmark Mortgages said: “Landmark Mortgages is authorised and regulated by the Financial Conduct Authority and customers therefore benefit from all the statutory and regulatory protections afforded by UK Law.
“As legal owner of the loans Landmark has consistently operated all accounts in accordance with their terms and conditions. Those include the terms on which Landmark is permitted to set its variable rate.
“Assertions that our variable rate is ‘extremely high’ are plainly wrong and the facts do not support them.
“In compliance with FCA regulations, Landmark reviews its fees and charges periodically to ensure that they are fair and reasonable.”
Landmark said most customers don’t pay their SVR and “benefit from loyalty discounts, tracker, or capped rates.”
“The Financial Ombudsman Service (FOS) carried out an impartial and detailed review and concluded Landmark had acted fairly in setting its SVR,” the spokesperson added.
The Big Mortgage Time Bomb, presented by The i Paper’s Housing Correspondent Vicky Spratt, will air on BBC Radio 4 on Sunday at 1.30pm. You can listen here. Read More Details
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