Imagine you're a homeowner in the mid-1990s wanting to do some renovations to your home. You walk to your local bank branch (online banking? No such thing!) and explain your need for some new carpets or perhaps a new kitchen to the friendly bank manager who you may have known for years (things were different in the 1990s).
Rather than just get a small loan you need for renovations, you are told by your trusted bank manager that Barclays has a new product, that won't be around for long, which means you can actually borrow 25% of the value of your house, so you can do the upstairs carpets as well.
The fine print? Rather than repay a fair rate of interest on the loan, you are set to lose 75% of all future appreciation in the value on your home.
Decades later, with the astronomical rise in property prices, you are, in effect, trapped in your home, knowing that after redeeming the mortgage, the proceeds you would receive in any sale would not even afford you a much smaller property. Alternatively, you may be selling the home in your capacity as the executor of an estate, with the amount to be distributed amongst beneficiaries significantly diminished.
For many Barclays customers that we are speaking to, this scenario is not fiction – it is reality. Whilst Barclays benefit from a huge financial windfall, their customers lose nearly all the equity in their home they worked so hard to buy.
What are these arrangements?
Shared Appreciation Mortgages (SAMs) were loans in the form of an equity release.
Typically, a customer was encouraged to borrow up to 25% of the value of their home. Little or no interest was payable during the loan, but when the borrower looked to redeem the mortgage or the home came to be sold, they owed the bank 75% of the appreciation in the value of their home.
Had Barclays been upfront with its customers about what they (and presumably their team of property market analysts and experts) predicted the housing market was going to do, there would be no right for these lenders to complain and we would not be writing this article. However, in our experience, not only was that information not shared but the literature accompanying the sale of SAMs told the opposite story, which was misleading and gives rise (in our opinion) to an unfair relationship.
How can we help?
We think that typical SAM terms like these are unfair and are likely to be unenforceable against those borrowers unlucky enough to be sold one.
Trowers & Hamlins are keen to speak to anyone who took out a SAM with Barclays between 1997-1998. We have years of experience advising on banking disputes and have detailed knowledge of these claims as Christopher Philpot, now of Trowers & Hamlins LLP originally started the group litigation against Barclays that has subsequently settled.
For further information about shared appreciation mortgages including FAQs read our previous article.
Get in touch today on a confidential and no obligation basis for a free introductory call on the contact details above.
