Legal Challenges Against Bank of Scotland: The Fallout from Shared Appreciation Mortgages
Author: Courtney Wilbor
Key Contact: Aisha Wardell & Soshana Day
At Acuity Law, we are assisting clients who were sold shared appreciation mortgages by the Bank of Scotland in the late 1990s. These complex financial products have caused significant financial distress, particularly for elderly and vulnerable homeowners, who were sold these shared appreciation mortgages often without fully understanding the long-term financial implications.
What is a Shared Appreciation Mortgage?
Shared appreciation mortgages were marketed and sold by the Bank of Scotland and Barclays predominantly to elderly homeowners. In return for an immediate release of up to 25% of the home’s equity, mortgagors were typically required to sign over 75% of the future appreciation in the property’s value. The loan, along with any share appreciation, was typically repayable upon the borrower’s death, or the sale of the property to fund care.
Due to the significant house price inflation since the late 1990s, on top of repaying the loan itself (and, in some cases, interest) many customers now face repaying amounts which far exceed to original loan taken out, leaving many effectively trapped in their homes, unable to afford to move.
There have been instances that we have seen where mortgagors have taken out a loan of £25,000 and after 26 years having to pay back £333,000, representing 75% of the appreciation in value of their homes. Other instances have seen customers taking out a loan of £75,000, resulting in a staggering £673,1000 being potentially repayable.
Whilst these figures may seem extreme, many borrowers now face redemption figures in the hundreds of thousands, highlighting the severe financial impact of shared appreciation mortgages on both homeowners and their families.
What action has been taken so far against the Bank of Scotland?
On 30 January 2024, the evening of a long-awaited 6 week trial, 160 current and former shared appreciation mortgage holders reached a settlement with the Bank of Scotland. Whilst the terms of the settlement were confidential, a media statement confirmed that there were “no changes to the mortgages, or their terms and conditions”.
How can we help?
The Bank of Scotland’s settlement has prompted many current and former shared appreciation mortgage holders to seek legal advice on potential claims. Acuity Law is now representing individuals who took out shared appreciation mortgages with the Bank of Scotland, working on a conditional fee agreement (“no win no fee”) basis.
If you have or had a shared appreciation mortgage (or are the personal representative of someone who did) please contact us at mortgages@acuitylaw.com for advice on whether we may be able to assist (noting that there are time limits within which any claim must be brought).
