Page last updated at 12:07 GMT, Thursday, 14 May 2009 13:07 UK

The crippling cost of right-to-buy

By Nicola Cutcher and Andrew Verity
Propertywatch, BBC Two

Charles and Margaret
Charles and Margaret are perilously close to becoming homeless

If there has been one event that has changed British attitudes to home ownership more than any other in the last three decades it was the Right to Buy.

Twenty-nine years on from Margaret Thatcher's decision to give council tenants the right to buy the house they had been renting, the echoes are still reverberating - economically, politically and socially.

In the recent boom the Right to Buy slowed to a trickle. Even with a discount most council tenants could no longer raise a mortgage big enough to buy. But then came the subprime lenders. And again the idea was held out that anyone could buy their own home.

This has had its consequences for Charles and Margaret Okwalinga. They fled Uganda ten years ago and were placed in a homeless hostel when they first arrived in the UK.

They got their council house in 2000, a three-bedroom family home in Deptford for themselves and their three children.

I do look back now at the secure tenancy and the affordable rent and no threat of eviction because we could have kept up with that rent

Charles Okwalinga

Then, after three years in the property, Charles and Margaret were thrilled to find that they were eligible for Right to Buy.

Since its inception in 1980, 717,000 homes have been sold under the scheme.

The government gave Charles and Margaret £16,000 towards their deposit, and the couple put in £15,000.

This left them with a mortgage of £165,000.

Their interest-only mortgage demanded monthly payments of £900 per month, which seemed manageable as Charles was earning a salary of £18,000 and Margaret was starting up a catering business.

Poor credit rating

Unfortunately they had a poor credit rating because they had no credit history and they were only offered a mortgage by a sub-prime lender with interest rates of 9.8%.

Charles and Margaret thought they were doing the responsible thing by owning a house.

They saw it as security, planned to adapt the house to their style and taste and believed they were securing the future for themselves and an inheritance for their children.

Margaret's catering business grew and the couple opened up their own restaurant in Hackney selling East African food. Charles decided to work full-time on the business with Margaret.

Troubles began when their mortgage deal expired and their payments jumped.

"At one point we were paying £1,500 every month, up from £900, which was very, very high," says Margaret.

Margaret, Charles and one of their daughters in their back garden
The couple are doing all they can to meet their monthly payments

Their restaurant and catering business was also hit by the credit crunch. It meant meeting the mortgage payments became harder and harder.

After six months of failing to meet their full payments they were £6,000 in arrears.

Their lender applied to the courts to repossess the family's home and the court ruled that the couple had to pay money towards their mortgage arrears on top of the mortgage itself each month.

It also specified that the arrears must be cleared in two years which added time pressure.

Charles felt even more panicked after the ruling.

"We've always been in constant correspondence even when we were late paying, saying this was all we could pay. We've always tried to do our best and given it priority because it is our home, our only home."

Facing eviction

Repayments for Charles and Margaret peaked at £1,800 - £1,500 of mortgage plus £300 towards the arrears - and they were unable to meet them reliably and fully each month.

Their lender took them back to court. This time the court granted the lender powers of eviction in August 2008.

At the court an advisor told Charles and Margaret that the only way to stave off eviction was to come up with a lump sum to offer their lender towards their arrears.

They raced around family and friends, begging for money, and managed to stump up £5,000.

On the day of their eviction they begged the lender to accept the cash payment and promised to do all they could to meet their monthly payments.

Fortunately, at the last moment, the lender relented and allowed the family to stay in their home.

However, as the court has given the lender permission to repossess, Charles and Margaret remain at the direct mercy of their lender.

At present, with interest rates down, their monthly payments are more manageable, at £789 a month.

"It is a reprieve for us that rates our down but on the other hand our business is doing really poorly so we are in a similar struggle," says Charles.

"I do look back now at the secure tenancy and the affordable rent and no threat of eviction because we could have kept up with that rent.

Mood map

"We couldn't have modified the house the way we like, but just that peace of mind, knowing that you have a home to come back to, just that feeling would be better than the comfort of saying that you own a house."

If they are repossessed, they will be back to a homeless hostel or temporary housing while waiting for a place on the council housing list.

In England 67,000 families were living in temporary accommodation at the end of 2008.

Councils have had less incentive to build social housing and in 2009 there are one million fewer social homes to rent than in 1979.

If Charles' family lose their home, they will be put on a list of people in temporary accommodation, waiting for a home they can truly afford.

Propertywatch, a new series on property prices and the downturn, is broadcast from 11-14 May at 2000 BST on BBC Two.

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