Test case for shared appreciation mortgages
An interesting case is progressing through the courts; thousands of people who say they are trapped in their home by mortgages they took out in the 1990s are trying to get the contracts changed.
Lawyers say these deals were unfair giving too much to the banks and too little to the borrowers. Victims are being asked for £5,000 each to fund a multimillion pound test case.
But some are concerned about how they have been asked for the money which they may lose.
The deals, called shared appreciation mortgages (SAMs), were a form of equity release and were offered by the Bank of Scotland from 1996-1998 and Barclays in 1998.
The banks lent customers a quarter of the value of their home at no or low interest. In exchange, the banks received the loan plus three quarters of the growth in the price of the home when it was sold.
With house prices trebling since then the banks now own more than half the value of most of the properties mortgaged. That means the owners cannot afford to buy anywhere else if they sell.
Previous attempts to take court action have failed. But a new consumer credit law which came into force in April this year could now be used to challenge the deals in the courts.
There are about 8,500 people with unredeemed SAMs who can join the action. The £5,000 will almost certainly be lost unless the case is won, which is by no means certain.
Cases will run into a time-bar 12 years after they were taken out. So some of the early contracts could run out of time by the end of this year. Apparently, the case could take two years or more to resolve.
