Between 1996 and 1998, Barclays Bank and Bank of Scotland offered a type of mortgage known as the Shared Appreciation Mortgage. The product was interest free and taken out by around 15,000 customers but was secured against any future increase in the value of the property.
Now, an 88 year old widow, Beryl Hutchinson, fears she will lose her home and ability to pay for care costs because of the mortgage deal her husband signed up to in the 1990s. Barry Hutchinson did not think he would be able to obtain the £16,250 loan he needed to buy a new car and pay for improvements to their home, so he took out a Shared Appreciation Mortgage with Barclays.
If she sells the property, his widow will be liable to repay the bank £165,000, equating to a 75% share of the property’s appreciation.
She says she had no knowledge of the details of the loan taken out by her husband, who was a retired miner. She does not believe her husband understood the implications of taking out such a mortgage despite signing the paperwork herself, which she did not question at the time in the belief that her husband knew what he was doing.
The family only found out about the mortgage when Barry told his son Steve shortly before he died. Steve believes his father thought he would only have to repay the capital when the property was sold together with a sum of interest calculated using the house’s value.
Steve said that Barclays had been “really unhelpful” when he tried to discuss the matter with them but he was given a “hypothetical valuation” based on the amount Steve estimates the bungalow to currently be worth. Barclays said they would be owed £165,000, comprising £150,000 and the amount of the original loan.
To take legal action against the bank would not be possible due to potential costs of up to £25,000; money they do not have. However, Barclays has previously settled a group litigation brought by sixty of its customers out of court and Steve hopes his mother might be able to join a collective legal action with other people affected by shared appreciation mortgages.
Barclays said that customers were required to seek independent legal advice and sought confirmation from solicitors that all terms related to the legal charge and mortgage conditions were fully explained to customers.