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Shared appreciation mortgage challenge to go ahead

Court grants group litigation order to sue banks

Hilary Messer

Hilary Messer

Homeowners who took out shared appreciation mortgages (Sams) in the 1990s have been granted a group litigation order to allow them to take the banks that sold them to court.

Sams were sold by Barclays and Bank of Scotland (now part of the Lloyds Banking Group) in 1997 and 1998 and were mostly taken out by older people.

They allowed homeowners to borrow money against their property at zero or a reduced fixed rate of interest but they agreed to pay a share of up to 75% of the increase in the property’s value to the bank on top of the original loan when they sold it.

Spiralling debt

As house prices have risen significantly since then, borrowers have found that they owe more than four times their original loan. This means that many of them are trapped in their homes, which may now be unsuitable for them, as they can’t afford to move.

Someone who borrowed £25,000 at zero interest on a £100,000 house in 1998 would now owe £175,000 (the original loan plus 75% of the increase in the property’s value) as their house would now be worth around £300,000. Borrowers on a fixed rate of interest would owe more.

Law change

Of the 12,000 Sams sold, around 7,000 may still be unredeemed. Recent changes to the Consumer Credit Act mean that the Sam contracts could now be considered unfair, which means homeowners who have not yet redeemed their mortgage may have a chance of getting the terms of their loan revised by the court.

Hilary Messer of RWP Solicitors, who is leading the action, said: ‘We are delighted that the Chancellor of the High Court has consented to these cases being dealt with on a group basis, as this is the only practicable way that ordinary homeowners can take on the banks in litigation.’

So far, 126 claims have been issued by homeowners but many more are now expected to join the group action.

Time factor

If you have a shared appreciation mortgage, call Hilary Messer on 0118 984 2266 or email her to find out more without delay, as if you want to join the action you may be running out of time to make a claim.

For more on releasing equity from your home visit our equity release guide.


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