British banks sue over mortgage scandals: Customers lose millions.

According to The Sun: The two largest banks in the UK, Barclays and the Bank of Scotland, are facing lawsuits over controversial mortgage loans that have led to financial difficulties for many homeowners.

These mortgages, known as equity release mortgages (SAM), were introduced in the late 1990s and currently raise numerous questions due to their unfairness towards borrowers.

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Initially, these mortgages were offered to elderly individuals who wanted to access money from their homes without having to make monthly payments.

Borrowers could receive up to 25% of the value of their property, but the actual value only became apparent later.

When the loan had to be paid back - either through the sale of the property or the death of the borrower - the original loan amount had to be repaid along with a significant portion of the property's appreciated value.

Those who once believed these loans were beneficial are now facing hefty bills arising from rising property prices.

One of the plaintiffs is Annie Galbraith, who is among approximately 80 individuals suing Barclays over SAM.

She borrowed £33,750 in 1998, using her home in Tunbridge Wells as security, which was then valued at £135,000.

Today, her property is valued at nearly £1 million, but to repay the loan, she must pay back £678,750, which includes the original loan amount and 75% of the appreciation in her home's value.

Galbraith, who is now over 80 years old, struggles with mobility and wishes to downsize, yet her debts prevent her from doing so.

The law firm Teacher Stern, representing the plaintiffs, argues that SAM were unfair and caused financial hardship for borrowers.

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The lawsuit is based on a law that gives courts the ability to intervene when a lender's behavior is deemed unfair.

The firm points out that these mortgages prevented people from moving or transferring their property without leaving their families with enormous debts.

"SAM bank products were historical, and they were utilized by a relatively small number of customers, allowing people to access cash without making any payments during their lifetime,” noted a spokesperson for Barclays.

"We advised borrowers to seek financial advice to ensure that the product met their needs, and all borrowers were advised by their solicitors,” commented a spokesperson for the Bank of Scotland.

Both banks have previously reviewed some lawsuits from borrowers, but this case could put an end to the wrongs of such mortgages.

This gives affected individuals the opportunity to challenge debts that have trapped them for decades.

What are equity release mortgages?

Equity release mortgages (SAM) were introduced in the late 1990s to help homeowners access cash from their assets.

They were marketed as generous and innovative as they allowed people to borrow up to 25% of their home's value, often without monthly interest or payments during their lifetimes.

Upon the sale of the house or upon the death of the borrower, borrowers were required to repay the original amount plus a significant portion of the property's appreciated value.

This typically meant that 75% of the increase in the home's value had to be repaid, which due to the sharp rise in property prices since the late 1990s has become a substantial sum.

Many borrowers found themselves in a difficult situation due to rising prices and now struggled to sell or move due to repayment conditions.

What to do if you have an equity release mortgage?

If you or your parents have taken out a SAM mortgage and consider it unfair, you can take steps to raise an objection.

• Contact the bank that granted you the SAM and request compensation.
• Your complaint should highlight the unfair repayment conditions.
• The bank is obliged to respond to your complaint within eight weeks.
• If the response does not satisfy you, you can escalate your complaint to the Financial Ombudsman.
• This ombudsman reviews claims related to SAM, although compensation may be denied if the bank can prove that customers were aware of the risks when taking out the mortgage.
• It might be easier to sue Barclays as their SAMs were sold in offices, making it easier to prove mis-selling cases.
• At the Bank of Scotland, SAMs were sold by post, complicating the evidence of personal claims.
• You can also contest the valuation of the property at the time the SAM was granted.
• The banks often brought their own appraisers to evaluate the houses, and in some cases, the ombudsman supported borrowers when the valuations were inaccurate or outdated.
• If all else fails, you might consider filing a lawsuit against the bank.

This route should be considered as a last resort as social welfare proceedings can be costly, but sometimes it may be worthwhile if the financial burden of the mortgage is significant.

The situation surrounding equity release mortgages is actively evolving, and this lawsuit could represent an important step towards justice for many affected borrowers.