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Time running out for shared appreciation mortgage borrowers to claim compensation

Thousands of homeowners trapped by shared appreciation mortgages (SAMs) in the 1990s should take legal advice as soon as possible as there are time limits within which compensation must be claimed.

Laura Robinson, who leads Clarke Willmott’s specialist financial services litigation team, says banks such as Barclays sold SAMs between 1997 and 1998. Some individuals are reportedly being required to pay their lender over £1m, having borrowed a tiny fraction of that.

SAMs typically appear to have been sold to elderly people as a means to free up a small proportion of equity, but in return, the lender would take the majority of the property’s future appreciation in value.

The mortgages tended to involve lending around 25 per cent of the value (as it was at the time) of the home to the owner in return for a 75 per cent share in any increase in value.

“Many homeowners, or their estates, are now living with the extreme consequences,” said Laura Robinson.

“Unfortunately for the borrower, with the lender claiming something in the region of 75 per cent of the increase in value of the property, this often amounts to very large sums where house prices have increased dramatically over the years. Rumours suggest that substantial property value increases were forecast by lenders in the mid 90’s and that SAMs were designed to take advantage of that.”

“With people living longer into retirement, the period that the SAM was in place could be substantial and the property could have increased in value very significantly; average house prices have increased by more than 350 per cent since the late 1990’s. The effect is that some people with SAMs are finding themselves with far too little left to buy a new home, having handed over 75% of their home’s increase in value to their lender.”

Laura, who is a partner in Clarke Willmott’s Bristol office, says that in some instances, the SAM might only have been discovered by family members upon the death of the homeowner.

“Arguably, the mortgages shouldn’t have been sold at all, but where there is concern that the borrower didn’t understand the terms or consequences of what they were agreeing to, legal advice should be taken sooner rather than later as there are time limits within which compensation must be claimed.”

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