“I know the exact date I will lose my home – the 20th of March 2030,” Spencer Shackleton says. “It’s like being told the day I’ll die; nothing can change it.”

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.

In 2005, Spencer and his wife took out one of Northern Rock’s controversial “Together” mortgages, which allowed homebuyers to borrow more than the value of the property.

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.

According to the Financial Conduct Authority (FCA), an estimated 166,880 mortgage prisoners are in a similar situation – trapped in ‘closed book’ mortgages after their original lender collapsed during the 2008 financial crisis.

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.

A casualty of Northern Rock collapse

Spencer and his wife, a primary school teacher, bought their home for £89,000 and borrowed £112,000. The couple now owe £116,000, having switched to interest-only repayments after he was made redundant from his job as a transport manager for a haulage company in 2007.

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.

In early 2010, Spencer’s fixed-rate period ended. He contacted Northern Rock, which was now owned by the UK government as Northern Rock Asset Management (NRAM), and was told that he could not get a new fixed-rate deal.

“I was told to stay put; it didn’t even occur to me to try another lender and move my mortgage,” he said.

Spencer’s monthly repayments are now around £800, and he is stuck on a variable interest rate of 8.64 per cent, almost double the average two-year fixed rate of around 4.68 per cent.

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.

“I want to be strong for my wife and kids, but for years I’ve been shouldering all of these problems,” Spencer said. “When they ask why we can’t go on holiday, do this or do that… I have been trying to explain without frightening them that we might lose our home.”

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.

Spencer’s mortgage is managed by a company called Landmark Mortgages, which is not licensed to offer its customers new deals.

Landmark is owned by a US-based private equity firm, Cerberus Capital, which purchased Northern Rock loans from the UK government.

In total, around 270,000 Northern Rock mortgages, including Spencer’s, worth about £11.9 billion, were sold as part of the package.

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).

Then-chancellor George Osborne celebrated the sale as a win for the British taxpayer, saying: “Taxpayers will get back more money from Northern Rock than they were forced to put in during the financial crisis.”

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.

One prominent lawyer with years of experience in such deals, who asked to remain anonymous, said the NRAM sale enabled the Government to get rid of the high-risk loans, and Cerberus to buy a lucrative loan book.

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.”

“So, someone could buy it for a lot less than the price of the loan – say £50 – but they could still collect interest or repossess your house, meaning they end up with more than they paid for it.”

The lawyer made clear there was nothing “inherently wrong” with the government’s decision to sell NRAM to Cerberus.

“The sale gave investors exposure to assets that high street banks – or, in the case of Northern Rock, the British government – can’t take on,” they said.

“But if [companies such as Landmark] are aggressively collecting debt, then that’s another matter,” they added.

Spencer says Landmark twice started proceedings to repossess his home over mortgage arrears, but he has so far been able to get back on track with his payments.

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 2016, shortly after the sale of Northern Rock mortgages to Cerberus, a parliamentary report from the Public Accounts Committee (PAC) raised concerns that Landmark customers were not being treated “fairly”.

In the report, MPs noted Landmark customers were being charged higher interest rates than mortgage holders elsewhere.

The company is only regulated by the FCA with respect to existing mortgage deals and cannot offer additional borrowing.

Spencer says he has complained to Landmark, the FCA and the Financial Ombudsman several times about his mortgage rate.

He said, “I first complained in 2016. I remember our interest rate was getting more expensive while everyone else I knew was saying that their rates were going down.

“I wrote to the FCA and the Ombudsman about this. They both ruled in favour of Landmark in my complaint.”

Dominic Lindley, a financial services expert and secretary of the mortgage prisoners APPG, said: “Not being able to access fixed rate deals has meant there is absolutely nothing mortgage prisoners can do to protect themselves.”

Spencer believes mortgage prisoners should be entitled to financial support.

He said: “I think we should be bailed out the same way that the Government bailed the banks out.

“We are in this situation because we were put here by the government who sold off our mortgages to the highest bidder.”

In July, the FCA introduced new consumer duty rules aimed at setting “higher and clearer standards of consumer protection” for mortgage customers.

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.”

“Under the Duty, mortgage firms are still able to set their own prices, in line with their appetite for risk, but they must be able to show they’re providing value.

“We have already seen some firms operating closed products act to ensure they are ready to comply.”

The Labour government did not rule out further action on mortgage prisoners.

A spokesperson said: “This Government recognises the challenges that mortgage borrowers who are unable to switch to a new mortgage deal face.

“That is why we will work with regulators and the industry to ensure this issue is properly addressed.”

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.