Settlement reached in shared appreciation mortgage claim, but more to be done says lawyer

A shared appreciation mortgage is a form of equity release – it’s a way to access the value in your home without selling it. It’s expensive and generally regarded as a last resort option.

Barclays’ shared appreciation mortgages (‘SAMs’) were sold for a brief time in 1998 and involved lending 25% of the value of the borrowers’ home. This was effectively an interest-free loan secured on the property. The catch? Upon sale of the property, the homeowner or their estate had to pay Barclays the sum borrowed as well as 75% of the increase in the property’s value. The value is determined by Barclays rather than independently. When it comes to ending the mortgage, sums of around 15 times the amount borrowed are being repaid to Barclays. Here’s an example:-

Mr and Mrs Jones were in their mid-60’s and retired in 1998. They borrowed £15,000 for home improvements and holidays under a Barclays SAM, when their home was worth £60,000.

In 2024, Mr and Mrs Jones pass away. Their home is valued by Barclays at £360,000, but after a year on the market it eventually sells for £310,000.

The 75% is still calculated based on Barclays’ valuation, even though it appears that the property was overvalued. Mr and Mrs Jones’ estate has to pay Barclays 75% of the £300,000 increase in value (i.e. £225,000) plus the £15,000 borrowed. Barclays receives £240,000 from the £310,000 sale proceeds.

In our view, shared appreciation mortgages shouldn’t have been sold at all. The terms are grossly unfair, and there was a clear imbalance of knowledge – Barclays would have had access to UK house price history and would have known that in the 10 years leading up to 1998, UK house prices increased by over 10% on average. They would also have been well placed to analyse, or access analysis, regarding housing market forecasts in terms of likely future movements. The borrowers, however, did not.

Arguably, anyone who was sold one might have a claim and should take legal advice sooner rather than later. Generally speaking, one of the main obstacles to claims about historic events will be the passage of time.

You can make a complaint to the Financial Ombudsman Service (‘FOS’), which is a free service, and there’s no requirement to have representation (you can make the complaint yourself). The FOS can, and have, considered complaints in relation to advice given to borrowers about SAMs (one of the more recent final decisions published by the FOS can be found here). However, the FOS are heavily dependent on paper evidence in our experience so, without that, complaints about advice are unlikely to succeed. None have succeeded as yet, as far as we know.

Further, the FOS are restricted by their jurisdiction and cannot consider complaints about the fairness of a product, which is really the crux of the matter. In addition, both banks set up separate subsidiary companies through which the money was lent (e.g. Barclays SAMS Limited) and, as those companies aren’t regulated, the FOS cannot consider complaints against them.

All is not lost though. The Consumer Credit Act 1974 makes court proceedings possible against Barclays during the life of the shared appreciation mortgage, and within six years of it being redeemed. Those claims are based on there being an unfair relationship between the borrower and lender. There are a range of possible outcomes, ranging from the SAM being rendered unenforceable to the terms of the SAM being amended to make it fair. We’re acting for a group of SAM customers who are making claims against Barclays on that basis.

Court proceedings are very expensive, however, it’s possible to arrange funding and insurance so that others take the financial risk for you. We are offering a ‘no win, no fee’ arrangement to our clients and our aim is to make taking action possible for everyone, including those who don’t want to pay legal fees upfront or risk being out of pocket.