Northern Rock borrowers still prisoners of high mortgage rates

THOUSANDS of former Northern Rock customers are still trapped on high interest rates after their mortgages were sold to a US investor.

the new owner of the mortgages, New York-based Cerberus Capital Management, has been accused of miring customers in debt that they find almost impossible to pay off.

Many of the 65,000 customers are so- called ‘ mortgage prisoners’ – borrowers stuck with an expensive loan who are unable to shop around for a better deal because no other lender will take them on.

When Northern Rock went bust in 2007, the mortgages passed into the hands of the state. they were then sold to Cerberus as part of a £13billion bundle of home loans in 2015 by UK Asset Resolution (UKAR), a quango set up to recover money taxpayers spent on the banking bailouts.

A BBC Panorama investigation claims Cerberus privately told the Government it would offer customers better mortgage deals if the sale went ahead. But no improved interest rates have been offered, leading to claims that Cerberus was misleading ministers.

Customers who had hoped for better terms include Lisa and Mark Elkins from Kent. they are paying £2,500 a month on their mortgage because the interest is charged at almost 5 per cent – three times the best rates on the market.

the couple have borrowed £20,000 from family and friends, taken on extra jobs and worked long hours to make ends meet.

Mrs Elkins, 52, said they are now selling after 15 years in the house. She said: ‘ I love the house but it’s become a rock around my neck. You feel like you’re sinking and can’t get up. I can’t have that any more.’ other customers claim to have been badly treated by Cerberus, which oversees the operation through its Landmark Mortgages division.

Rachel and Adrian Neale, from Hinckley, Leicestershire, fell behind on payments after Mrs Neale, 39, became seriously ill. they have since paid off most of the arrears and have kept up their monthly payments.

But Landmark keeps mistakenly issuing default notices, Panorama claims. Mr Neale, 35, said: ‘they can pull the rug from underneath you at any time.’

Labour peer Lord McFall said he was told by UKAR that the mortgage customers would be offered better deals in the private sector. And a UKAR spokesman told Panorama that at the time it believed Cerberus intended to offer different loans to former Rock customers.

But Cerberus denies it ever promised to offer new lower interest loans. When it bought the book, the firm was planning to set up a new online bank and offer fresh loans. But it was told by the Financial Conduct Authority watchdog that no new lending could be done until the right systems were in place, Panorama claims. three years on, this has still not happened.

A spokesman for Cerberus said: ‘Cerberus categorically rejects the false and misleading allegations by BBC Panorama.

‘No undertaking was given to UKAR to offer new lending to customers. that was not and did not form any part of the agreement between Cerberus and UKAR in 2015.’

Landmark said: ‘Landmark promotes high conduct standards, adopting a tailored approach to customers experiencing financial hardship.’

‘You feel like you’re sinking’