I’m trapped with my flat due to cladding and face a 9.34% mortgage rate

A condo owner risks being burdened with a 9.34 percent mortgage interest because she can’t sell her home because of unsafe cladding and can’t switch lenders.

Donna Williams owns a flat in Berkshire with incendiary cladding and the current fixed-rate mortgage on her mortgage expires later this month.

She faces the switch to the 9.34 per cent rate, which would see her pay an extra £1,500 per month on her mortgage payments from the beginning of August.

Even her lowest cost option means she will have to pay an extra £700 to £800 a month towards her mortgage payments, if she switches to a new two-year fixed rate of 5.04 per cent with her existing lender.

That new fixed interest rate is more than double her existing mortgage rate of 2.4 percent, and would mean that she will continue to own the flat for longer.

The other alternative from her Birmingham Midshires mortgage lender is to switch to the bank’s standard variable rate, which is set at an astonishing 9.34 percent.

Birmingham Midshire’s standard variable rate is currently 8.84 per cent and will rise to 9.34 per cent from 1 August.

Moving here would be Donna’s only option to avoid the painful prepayment fees that come with a flat rate if she manages to sell her condo.

Donna struggles with this, however, as most lenders don’t want to issue new mortgages on homes with fire safety and unsafe siding issues, putting it out of reach for most potential buyers.

Mortgage rates have risen rapidly on expectations that the Bank of England’s base rate will have to rise further to tackle inflation. The basic rate has already been increased from 0.1 percent at the end of 2021 to 5 percent.

The average two-year fixed-rate mortgage reached 6.78 percent this week, but the standard variable rate is even higher in most cases.

Standard variable rates are lenders’ default rates, which people move to when their fixed term ends and they don’t take out another mortgage.

The rate is subject to change by lenders at any time and will usually rise when the Bank of England announces a rate hike.

Donna is currently renting the property she lives in while simultaneously renting out her siding-clad property in Berkshire.

However, she explains that the rental income does not cover the existing mortgage and service costs on the siding.

Her service costs were £12,000 last year, which she believes should have been around £3,000 earlier.

She said the increase in service costs was largely due to high home insurance and a watchman, who patrols the floors to sound the alarm if there is a fire in the building.

Donna said, “It’s all pushing me into more debt than I already have.” I can not handle it. There are so many people in the same boat as me.’

She’s trying to sell the property to a cash buyer, but she says doing so would mean selling it at a significant discount.

She said: ‘I’d get £200,000 less than it’s worth, but if I can pay off the mortgage and walk away with my sanity intact then that’s what I think I’ll do.

‘When I took out a new mortgage two years ago, if I had known then what I know now, I would have taken out a five-year fixed interest rate. The current rate is 2.4 percent and the new rate I’ve been offered is 5.04 percent.

“It’s terrible and people can’t pay their mortgages.”

It comes after research from Hamptons found that condo owners have seen service costs rise more than 50 percent over the past five years.

The average increase of 51.7 per cent since 2018 means homeowners now typically pay £1,431 a year on these costs, the equivalent of £119 a month.

However, those with upholstery issues will often pay much more and this drives up the average.

Much of this increase — a total of 37 percent — took place between 2018 and 2019, according to research from Hamptons.

The estate agent explained that this was due to the large number of fire safety measures taken in the aftermath of the Grenfell Tower disaster.

The 2017 Grenfell Tower fire in London killed 72 people and injured a further 70.

However, over the past 12 months, average service costs have increased by 8 percent, broadly in line with broader inflation.

It means tenants pay a total of around £7.6bn in service costs each year.