Mortgage ‘Prisoners’ Launch Legal Bid
On the 18th December it was announced that Harcus Parker had begun legal proceedings on behalf of current and former Northern Rock and Bradford & Bingley mortgage holders.
The firm has previously acted in high-profile disputes, such as shareholder action against Lloyds Banking group in relation to a claim brought by over 200,000 ‘mortgage prisoners’.
The proceedings being brought are from mortgage holders who claim they have been trapped, or held ‘prisoner’, into paying rates in excess of 5% for the past twelve years, whilst the market has been at all-time lows, with the current rates generally below 3% and some lenders offering fixed rate mortgages for less than 1.5%.
When Northern Rock collapsed, mortgage customers had their loans moved to Northern Rock Asset Management (NRAM), a company set up by the Government. In 2010 the firm was taken under the parent company UK Asset Resolution (UKAR).
Under this firm, it was forbidden to issue any new loans, instead customers were moved to a variable rate when their deal expired, which has been consistently higher than the industry average.
That was not the only blow to customers; some had taken out up to 125% mortgages before the financial crash in 2007, meaning that when their deals ended, they were unable to move to other lenders.
As lending rules had been tightened due to the crash, many were left without the means or the equity in the property to meet the minimum deposit requirements for other lenders, leaving them trapped in the variable rate offered by NRAM.
Due to strict affordability rules, it also meant that those who did have equity may still have been trapped by being unable to meet the requirements of affordability. This left families on low incomes paying higher mortgage rates than necessary. This is Money reported:
“Had they [Northern Rock mortgage customers] instead been able to remortgage and paid the average tracker rate between January 2009 and May 2017, a borrower with a typical £200,000 interest-only mortgage would have saved £22,398 in that period. If they had used this money to pay down their mortgage, they would have reduced their debt from £200,000 to £175,000.”
Apparently acting on a no win, no fee basis, Harcus Parker has sent a letter before action.
Discussing the situation, Damon Parker, managing partner at Harcus Parker said:
“Our clients are regular, hard-working people who have done nothing wrong. Nevertheless, they have been unfairly treated and stigmatised by the failings of the banking system. Many of our clients have told us that, before they joined our group, they thought they were alone. Many have felt ashamed about being in financial hardship and of the impact it has had on their families. By bringing a claim as part of a group, they are benefiting from strength in numbers.”
Rachel Neale, chair of The Mortgage Prisoner’s Committee, who instructed Harcus Parker, stated:
“By bringing this litigation, I naturally want to help to ensure that we all achieve financial recompense, but I also want to highlight the issues so that others are not affected in the same in future.”