The Treasury has pledged to be working on the removal of barriers to cheaper deals that have trapped ‘mortgage prisoners’. However, 150,000 people under the banner ‘UK Mortgage Prisoner Action Group’ have now threatened legal action against two lending institutions that ‘unfairly trapped’ them into mortgages with high interest rates, when the banks were taken into public ownership.
Letters of claim have been sent to UK Asset Resolution, setting out the borrowers’ assertion that they were not treated fairly because the mortgage lenders had failed to offer a fair interest rate.
Mortgages taken out around the time of the financial crisis in the late 2000s account for most of those affected. People paying mortgages that had been taken out with Northern Rock and Bradford & Bingley (or its brand Mortgage Express) have typically been charging interest rates over 5% for the last twelve years.
Mortgages with Northern Rock were transferred to Northern Rock Asset Management, which was owned by holding company UK Asset Resolution, that was established by the government in 2010. Some of these mortgages were in turn were sold to subsidiary companies of banks, including the Cooperative Bank and TSB Bank.
Court proceedings will commence in three months’ time if the banks now holding the mortgages do not provide a satisfactory response, and TSB has said it already recognised its duty of care and had developed the capability for its customers to change mortgage product.
It is estimated that up to 200,000 borrowers have overpaid, as their deals left them unable to switch to a cheaper mortgage. The high rates meant interest payments running into ‘tens of thousands of pounds’, and lawyers estimate that a home owner with a £100,000 interest-only mortgage, who was paying interest that was 2%-3% higher than ‘fair’, would have paid an additional £20,000-£30,000.
If you’re investing in a property purchase, ask a Chartered Surveyor for a building survey that will provide you with a survey report detailing the condition and structural elements of your new property to help you safeguard your investment.