New hope for SAMS mortgage holders

New hope for SAMS mortgage holders

Recent changes in the Consumer Credit Act 1974 mean that holders of Shared Appreciation Mortgages (SAMS) sold by HBOS and Barclays may be able to obtain compensation.

SAMS were a form of equity release sold during the 1990s.

They provided a loan secured against the future equity growth of a property.

Under the arrangement, the SAMS provider is only repaid if the property is sold or on the death of the mortgage holder.

The majority of the loans were made on a zero interest basis, with banks typically receiving up to 75% of the appreciation in value of the property as well as repayment of the original loan, in return for having lent only up to 25% of the property value.

Property inflation over the past decade means that the return is far above a reasonable interest rate for the loan and that SAMS holders have been largely prevented from downsizing because under the terms of the mortgage, they haven’t sufficient equity to buy a smaller property.

Barclays has introduced a “Shared Appreciation Mortgage Hardship Scheme” that considers individual cases where SAMS borrowers have become trapped in unsuitable accommodation.

However, a SAMS action group has been calling for compensation for the thousands of people who took out the loans and recent changes in the law pose the possibility of a group action.

UK Courts now have more freedom to rule on whether the relationship between a creditor and a debtor is “unfair” to the debtor, plus wider powers to vary the terms of the loan agreement.

Around 15,000 people are estimated to have taken out a SAM between 1996 and 1998 and law firm RWP has now been instructed to bring a group action.

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