Thousands of pensioners trapped by high street banks’ 900 per cent ‘shared appreciation’ deals

TENS of thousands of pensioners are stranded in their homes due to mortgage deals saddling them with debts worth up to NINE times more than their original loan, a Sun probe reveals.

The tragedy is the legacy of shared appreciation mortgages, where homeowners could release equity in return for giving their bank the lion’s share of future profits.

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Their distressing consequences were highlighted this week by the case of a 90-year-old woman who took out a £22,500 loan with Barclays and now owes £177,000.

The Sun has since been contacted by pensioners left unable to sell or leave their homes to their children.

MPs last night backed our call for authorities to launch a full probe into these loans and for the banks involved to cancel the debts.

Shared appreciation mortgages, known as SAMS, were a product of the unregulated loan marked in the Eighties and Nineties.

They were targeted at over-60s who had paid off their mortgages and wanted to release cash from their homes.

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They were considered so revolutionary that in 1998 the SAM was declared one of 231 “Millennium Products" by Tony Blair’s Labour Government.

An example of such a loan was even put on display in London’s Millennium Dome.

Some 12,000 were sold by Barclays and Bank of Scotland alone between 1996 and 1998.

But many others were sold as far back as the late Eighties, as well as after 1998.

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Lenders typically gave the borrower around 25 per cent of the value of their property as an interest-free cash loan in return for 75 per cent of the home’s future increase in value.

SAMs are paid off when the person or couple taking it out died, or they sold to downsize.

But back then property prices were relatively stable and borrowers did not realise how they would later rocket, causing the amount owed to soar as well.

In 1996 the average cost of a home was £50,930, compared to more than £204,000 in 2016.

Mortgages were not properly regulated until 2004, although banks still had to operate under the Banking Code.

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But Barclays and Bank of Scotland had separate companies to deal with these mortgages, which were not signed up to the code.

Campaigners have previously fought hard against the debts, raising £1.5million in 2009 to take a class action against Barclays and Bank of Scotland.

When the cash ran out the case was withdrawn and campaigners were hit with millions in the banks’ legal costs.

To avoid paying them the campaigners were forced to sign gagging orders to prevent them ever complaining about SAMs again.

Were you stung by a SAM loan? E-mail your story to [email protected]

Labour MP Wes Streeting, a member of the Treasury Select Committee, last night pledged to support The Sun’s call for action.

He said: “Banks stand accused of profiting on a huge scale at the expense of decent people.

“The banks need to do the decent thing and acknowledge it is unreasonable to expect these huge sums back for such small loans. I will call on the Treasury Select Committee to get the bank bosses in to explain how this situation has come about.”

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Lib Dem leader Tim Farron said: “We think regulators like the FCA and the financial ombudsmen should look at this urgently.”

A Barclays spokesman said the loans had required no interest or monthly repayments and insisted: “We explained the mortgage terms to each customer.

“Barclays has a SAM hardship scheme designed to help customers experiencing difficulty during the mortgage term who may wish to move to a smaller property.”

A Bank of Scotland spokesman said: “If a customer feels they are facing financial hardship as a result of their SAM we would encourage them to contact us to see if we can assist.”

How SAM's stack up

USING the Nationwide price index, the average house in 1986 would have got a 25 per cent SAM of £12,733.

That house would now be worth £204,238.

Based on a calculation of 75 per cent of the increase plus the original loan the homeowner would have to stump up £127,714 now.

Plus they may need to pay valuation fees.

• House value in 1996: £50,930
• Loan then: £12,733
• House value now: £204,238
• Increase in value: £153,308
• 75% of increase: £114,981
• Owed now: £127,714
• Bank's profit: 903%

DRIVING instructor Amanda Hall had to hand Barclays more than £100,000 this week after losing a fight over her parents’ shared appreciation deal.

She insists her late mum and dad Alan and Judie, had no idea how much their debt would be.

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Amanda says they believed the sum was a much smaller percentage of their bungalow’s appreciation plus the value of the original loan.

The property in Earls Barton, Northants, was valued at £82,500 at the time the deal was taken out in 1998.

It sold for £220,000 after Judie died in July last year.

Amanda, 52, said: “They were oblivious because they believed it was only 25 per cent, not 75 per cent.

“It wasn’t explained to them properly and you would have to be a mathematician to understand the paperwork.

"They weren’t stupid either, they were very sharp with their money. They would be turning in their graves now if they knew.

“If someone had said to my dad, ‘You are borrowing £20,000 but it could be that your kids would have to pay back over £100,000’ he wouldn’t have had anything to do with it.

“I’ve been to the Ombudsman but they advised me not to take it further. You can’t fight Barclays because they are too powerful.

“Mum and Dad trusted Barclays and had been customers with them for 50 years. They were told this was the best way to borrow money.”

ENGINEER Richard Fuller is fighting to keep the village home his family have lived in for generations.

He is facing a £225,000 bill from the Bank of Scotland to pay off his late parents’ SAM loan of £62,500 on their house in Bisley, Surrey.

Richard says his parents switched to the shared appreciation deal as they were struggling to meet the high repayments charged by their previous lender.

Only later did they realise the size of the debts they faced.

Richard, 65, said: “My parents looked at downsizing but because they would have to pay such a big lump sum back to the bank they couldn’t afford to, so they stayed where they were.

“They were concerned about what would happen to the house once they were gone. My dad was brought up in the house and didn’t want to see it leave the family.

“The property was built by my grandfather and I don’t want to let it go. But there’s going to come a time if I can’t get an agreement with the bank when I will have to sell and give them their money.

“It’s a David and Goliath situation – the banks have all the money they need to take on the individual.”

SISTERS Lucy Lucas and Alison Cox say their elderly father William had worried about his SAM deal “until the day he died”.

Company director William Crook and wife Bridget took out a £30,000 loan on their £130,000 Caterham house for extra income.

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Both died this year and Barclays is now demanding the family pay £213,600 following the sale of the house for £380,000.

After realising how the soaring value of his home would affect his share, William contacted various campaign groups fighting against the deals. He even asked his then-MP Peter Ainsworth for help, but was unable to resolve the problem.

In notes left for his family, William insisted: “There is no doubt in my mind that this was a misleading offer and the full implications were not advised to me.”

Lucy, 46, told The Sun: “We don’t believe our father realised what he was signing up to.

“Unfortunately he stopped challenging Barclays due to the onset of vascular dementia, and his files are quite jumbled. He worried about the loan until the day he died.”

Yesterday the family received a call from Barclays to say their complaint about the loan terms being misleading had been rejected, because the bank believes “the sales process was clear”.

They are now set to take their grievance to the Financial Ombudsman.

ONE 80-year-old pensioner who contacted The Sun said she was worried about dying because of the impact of the SAM deal on her family’s inheritance.

She took out a £50,000 loan from Barclays in 1998, when her house in Beckenham was valued at £250,000.

Now it is worth £550,000, it means that with the 75 per cent appreciation of value plus the value of the loan it would cost her £275,000 to pay off the debt.

She said: “My husband died a couple of months ago and I’d dearly like to sort this out before I also drop dead and leave my children with a heavy burden to deal with.

“I tried and tried talking to Barclays but in the end I gave up. I even went to the ombudswoman and she said that I knew what the terms and conditions were.

“It would seem that far from being the ‘bargain’ short-term loan extolled by all the publicity at that time, we would have been better off taking out an ordinary mortgage and paying that off early.

“The only selling point which had attracted us was that no payments would be made until redemption, when 75 per cent of any ‘increased’ value would be due. On the face of it this seemed very reasonable.”