SAMs victims 'plot court case'

30/09/2008

People who cannot move home thanks to taking out a type of mortgage product sold in the 1990s are planning a test case against lenders, the BBC reports.

The pressure group Struggle Against Financial Exploitation (SAFE) is asking its members to provide £5,000 each to fund the legal action - which could cost many millions of pounds.

The problem stems from the equity release-style shared application mortgages (SAMs) sold by Bank of Scotland and Barclays around a decade ago.

These work by offering borrowers a quarter of their home's value at a very low rate of interest, or interest fee.

However, the bank gets three-quarters of the growth in price between the time the home is bought and the time it is sold.

Unfortunately for the borrowers, house prices have boomed in the years since - and have only begun to drop with the onset of the credit crunch last year.

This means that many SAMs customers are effectively trapped in their homes, as it would cost too much to pay the price difference to the bank in order to move.

Speaking to the broadcaster Hilary Messer, director of solicitors Richard Wilson Pangbourne, said: "If the courts take the view, and we think they will, that the relationship between the homeowner and the bank is unfair that opens the door for the contracts to be revisited and for the court to substitute what they believe is a fairer outcome."

Tags; Housing Debt and Bills, Young Family Finances, Retirement Money Problems,

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