Barclays, HBOS sued by homeowners over shared appreciation mortgages

Published 21st Jan 2009

A group of homeowners who claim they were sold unfair shared appreciation mortgages took the first step towards suing their lenders today.

Lawyers representing 222 people sent out a legal letter before action, the first stage in the process of launching a legal case, to Barclays and HBOS concerning the loans.

The homeowners, who have each paid £5,000 to take part in the action, will argue that a recent change in the law has made it possible for them to sue their lenders over the “unfair” loans.

Under shared appreciation mortgages (Sams), interest on the loan is typically frozen. In exchange, the bank receives up to 75 per cent of the appreciation in the value of the property in the 10 years prior to when it is sold as well as having the original sum borrowed repaid.
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The mortgages were sold in large quantities throughout the UK in 1997 and 1998 but many people now find themselves trapped in their homes, unable to raise enough money to buy a new property from the sale of their current one after paying the banks their share of the appreciation.

The homeowners are represented by Hilary Messer, head of litigation at RWP Solicitors, who says that recent changes to the Consumer Credit Act make it possible to sue the banks over the mortgages.

Under the new act, which is retrospective, if a court determines that the relationship between a creditor and a debtor is unfair to the debtor, it has wide powers to vary the terms of the loan agreement.

The group are demanding a reduction in the percentage of the appreciation in their property that is payable to the bank or a cap on the amount payable to the bank as its share.

Barclays said it was not aware that any legal proceedings have been commenced against it, particularly as it has only just received correspondence from a firm of solicitors about this issue. While that correspondence is being considered, it would not be appropriate to comment further on its contents.

It added: “Barclays has great sympathy for those Sams customers who have experienced difficulties. As a result, in 2007 Barclays created the hardship scheme for shared appreciation mortgage customers."

HBOS said: “We have not received any formal notification that a court action has been raised. Therefore, we are not able to make a comment.”

Around 8,000 people are thought to hold a shared appreciation mortgage.

Source: ' Times '

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