Mortgage prisoners’ trapped on standard variable rates are being pushed towards financial breaking point following the rise in the Bank of England base rate to 0.5%, according to interactive investor.

The investment firm found that many already report having to use pension income to meet repayments and have given up hope of ever retiring.

How many borrowers are mortgage prisoners?

There are 47,000 mortgage prisoners, according to the Financial Conduct Authority, plus tens of thousands of others who are stuck with lenders because of being in arrears or coming to the end of their mortgage and being unable to switch.

There’s also an estimated 1.93 million borrowers in England that have been rejected by lenders when trying to remortgage and unable to sell their homes because their flat has been caught up in the cladding crisis following the Grenfell disaster.

What is the cost?

Borrowers stuck on typical standard variable rates (SVRs) are paying a rate of about 4.46%, said interactive investor. This compares to 2.44%, 2.71% and 2.85% for the average two-year, five-year and 10-year fixed rate deal, respectively.

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On a mortgage with £100,000 left to pay over 10 years, a rise of 0.5% on the current SVR of 4.46% would add around £300 onto monthly repayments over one year, up from £1,034 to £1,059 a month.

However, mortgage prisoners may be paying much higher variable rates of up to 9%, as their loans were sold on to unregulated mortgage lenders. A rise from 9% to 9.5% would push repayments up by £324 a year, up from £1,267 a month to £1,294 a month.

Becky O’Connor, head of pensions and savings at interactive investor, said: “The plight of mortgage prisoners highlights the ‘house of cards’ effect on our finances when one big bill spirals out of control: the knock-on impact for other parts of your finances can be disastrous.

“Unfortunately, a common casualty of being a mortgage prisoner is long term savings and investments, such as pensions.

“Here is a group which for years, has been paying well above the odds for their home loans. The knock-on effect for many mortgage prisoners is that they have had to use savings and even sacrifice pension contributions in order to keep the roofs above their heads.

“Some, who are already able to access their pensions, have had to use their pension money to meet mortgage repayments rather than to fund their retirements. As a result, some say they fear they will never be able to retire.”

Myron Jobson, senior personal finance analyst at interactive investor, added: “Being trapped on a pricey mortgage with no way out places a significant pressure on budgets, and can also take its toll emotionally.

“The rate rise combined with the upcoming hike in national insurance contributions, rising energy prices and ballooning inflation threatens to push some of those already facing higher than average household bills to breaking point. This includes mortgage prisoners.”