Two of the UK’s largest banks, Barclays and Bank of Scotland, are facing potential lawsuits over controversial shared appreciation mortgages (Sams), which critics argue have left borrowers owing up to 20 times more than they originally borrowed.
The legal challenge is being led by law firm Teacher Stern, which is bringing group actions on behalf of almost 80 claimants, including elderly borrowers and their families. The firm argues that Sams were “entirely unfair” products that have financially trapped homeowners.
Borrowers Owed Hundreds of Thousands More Than Original Loans
One claimant, Annie Galbraith, borrowed £33,750 from Barclays in 1998 against her Tunbridge Wells property. Due to soaring house prices, her repayment is now estimated at nearly £678,750, which includes 75% of her home’s increased value plus the original loan.
Galbraith, now in her 80s and facing mobility issues, is unable to downsize as selling her property would leave her with insufficient funds to buy another home. “She is trapped,” said a close friend, Duncan Humber.
How Shared Appreciation Mortgages Worked
The Sams scheme, available only from Barclays and Bank of Scotland between 1996 and 1998, targeted “asset-rich but cash-poor” homeowners. Borrowers could release up to 25% of their property’s value, but in return, they were required to give up 75% of any future increase in value when the loan was repaid or the property sold.
As house prices have soared since the late 1990s, many borrowers have faced enormous repayments, leaving them unable to move or burdening their families with financial stress after their deaths.
Banks Defend Mortgage Scheme
Barclays described Sams as a “historic product” used by a small number of customers, stressing that borrowers retained their equity and a share of gains. The bank also highlighted that all customers had to take independent legal advice before signing.
Similarly, Bank of Scotland defended Sams as a “specialist type of mortgage,” stressing that customers were advised to seek financial guidance. The bank added that it works to support borrowers facing hardship but declined to comment on individual cases.
Legal Challenge Under Consumer Credit Act
Teacher Stern is arguing that Sams violated section 140 of the Consumer Credit Act, which allows courts to intervene if a financial arrangement is deemed unfair. The group actions aim to finally test the fairness of these contracts in court, after both banks previously reached confidential out-of-court settlements with some affected borrowers.
