Families caught in the home loans trap
It’s bad enough that families are caught in the shared appreciation mortgages trap and even worse that the banks, adjudicators and the government are unwilling to address the scandal.
My sister and I, as executors of our late mother’s estate, endured a four-year nightmare.
In september 1997, on buying their final cottage home for around £90,000 and suffering the tribulations of terminal cancer, our father took an advance of £21,250 from the Bank of scotland ‘to replace white goods and supplement income’.
the advance, a shared appreciation mortgage, came with a ‘typical APR’ of 9 per cent and arrangement fee of £500. that alone was 2.35 per cent of the advance.
sadly, our father passed away barely seven months after agreeing the loan and my mother remained in the house for nine more years before she died in December 2007.
My sister and I were aware of some sort of charge on the property, but in our parents’ personal effects there was no record of an agreement with the bank.
It needed a strong letter from our solicitors to extract the details, and we were appalled by the onerous terms.
When we finally exchanged contracts with a buyer for the property, at £175,000, the bank’s share totalled £88,260. Its agreement with our parents established a right to 75 per cent of the appreciation in the property value, plus the return on the original £21,250 advance. this makes a nonsense of the quoted ‘typical APR’.
As horrendous as this type of usury may be, it wasn’t the worst aspect. that was the casual indifference of the Bank of scotland to even the basics of good customer care.
the Financial Ombudsman rejected our appeals, saying ‘the bank could not have anticipated the increase in house prices’ and recommended we accept the derisory £250 compensation offered by the bank.
TIM FOSTER, Beddington, Surrey