'My mortgage was set to rise to £3,500 until the bank offered me a lifeline'

Soulla Christodoulou had been on an interest-only mortgage since 2009 when she and her husband got divorced and she was unable to pay the full repayment mortgage on her own.

She had gone to her broker with her concerns, however, they told her there was nothing they could do. She was looking at a rate of around £3,500 a month.

The single mother lives in a four-bedroom house with her three sons in North London.

Panicked about the future, she thought the only way to move forward was to sell their home and start again elsewhere.

With £120,000 left to pay off the house, Ms Christodoulou was paying little more than £150 a month, as her interest rate was one or two percent.

But Ms Christodoulou had always been working as a teacher on a regular, full-time salary, so her mortgage broker had been able to simply renew her interest-only deal whenever she needed to remortgage.

By the time her latest deal was up, however, she had become a self-employed author. She didn’t have three years’ worth of earnings to show, and her mortgage would need to move to a standard repayment mortgage — at a much higher rate.

Commenting on the cost of living crisis and how expensive things had become, Ms Christodoulou told iNews: “The biggest thing is the food bill. I would say it’s gone from about £120 a week to £300.

When you’re buying for a big family, it’s crazy. Gas and electricity suddenly went up from £320 and £500 at one point. I couldn’t afford a massively higher mortgage as well.”

She first considered equity release as a way of keeping her property however this can be a very expensive way to accessing the equity in one’s property.

Ms Christodoulou said: “I spoke to two companies and I got to the point where I was ready to sign. I would have to borrow the outstanding £120,000 and I would be locked into this equity release plan, which was stopping me from signing it.”

One morning, however, she decided to call her bank to hear her options before she committed to any equity release deal. The bank were able to help her and four months later, she had a new mortgage deal – for £413 a month.

She said: ““I feel very lucky. I spoke to somebody who was really compassionate about my situation. They were so kind and understanding, I honestly felt like there was a guardian angel looking over me.

The bank was able to keep her on the interest-only mortgage, despite her lack of stable income or the accounts to show for it. She locked in for five years.

As her mortgage is interest-only, she is not paying off any of the capital that she owes. This means that when her mortgage term is up, which is two years after her current deal comes to an end, she will need to repay the full £120,000.

Ms Christodoulou is far from alone in this position. In the 1990s and 2000s, hundreds of thousands of borrowers took on interest-only mortgages.

According to UK Finance, there were 702,000 interest-only mortgages outstanding at the end of 2022 and 220,000 partial interest-only deals.

She concluded: “I think about having to pay off the loan on and off. I just keep hoping that one of my books will be a bestseller and I’ll be able to pay it back easily.

“I’m overpaying my mortgage by £800 a month, so I am chipping away at the loan. It’s doable to pay that and I can still go out and enjoy myself — I’m not living to pay off the mortgage — but I’m being sensible as well. The house is worth £1.4million, so in a worst-case scenario I can sell the property and buy something smaller with the difference.”