Shared appreciation mortgages

Lloyds Banking Group sued by homeowners who were sold mortgages tied to house price appreciation

The Bank of Scotland, now part of Lloyds Banking Group, is being sued by a group of 150 homeowners who allege that the mortgages sold to them in the late 1990’s are now leaving them owing the bank thousands of pounds due to the rise in house prices over the last 30 years.

The bank targeted customers approaching retirement and offered them the Shared Appreciation Mortgage which gave borrowers the opportunity to release up to 25% of their property value. Once the homeowner died or sold the house, the bank would receive the value of the loan plus 75% of the appreciation of the value of the property. The banks have argued that these mortgages were originally a risk to them, as the house prices could have depreciated; however, the law firm acting for the claimants alleges that high returns were guaranteed - the average price of a UK property in January 1991 according to Land Registry data was £57,086. The average price of a UK property in January 2020 was £231,940, which is over quadruple the 1991 average. These mortgages have trapped elderly homeowners, as they are unable to sell their property due to the substantial debts they owe to the bank.

The 2006 amendments to the Consumer Credit Act 1974 mean that the relationship between the bank and the borrowers is likely to be seen as an unfair credit relationship by the courts due to the disadvantaged position of the borrower relating to the 75% payment of appreciation of the property value. Section 140A of the Act determines the circumstances in which courts may intervene in unfair credit relationships and, in this case, the courts would likely seek to improve the outcome for the borrowers by placing them in a fairer position.

In June 2021 Barclays Bank settled with 37 homeowners who also took out shared appreciation mortgages in the late 90’s. While the details of this settlement are undisclosed, Teacher Stern LLP have stated that some of the losses amounted to hundreds of thousands of pounds. The law firm has also commented that the value of the claims against Lloyds Banking Group could be as high as £50 million.

This case is due before the High Court in October 2021.

How can Jamieson Alexander Legal help?

Our highly experienced Banking and Finance Litigation team can assist with any shared appreciation mortgage claims.

We are happy to have an initial call with you to discuss how we may be able to help.

If you would like to discuss any of the above or would like our help, please contact Abbie Audrain on 0330 460 6098 or abbie@jamiesonalexander.co.uk, or the Head of Banking and Finance Litigation at Jamieson Alexander, Anastasia Ttofison 0330 460 6090 or anastasia@jamiesonalexander.co.uk

Abbie Audrain


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