What is the Mortgage Prisoner claim about?

Hundreds of thousands of homeowners are or have until recently been trapped paying excessively high interest rates on their mortgages.

In general, when you take out a residential mortgage the interest is set at an introductory rate for a few years before changing to the lender’s reversionary rate, which is often called the ‘standard variable rate’. The reversionary rate is normally set at a higher level than the lender’s introductory rates and is used to encourage borrowers to re-mortgage and take advantage of the lower introductory rates. Such a model benefits borrowers and lenders; lenders generate fees on the transition and borrowers benefit from interest rates below the standard variable rate.

Following the uncertainty caused by the global financial crisis in 2007 and 2008, some lenders stopped offering new introductory rates to their existing customers or stopped actively competing in the mortgage market for new customers. They became ‘inactive’ lenders. The most well-known examples are Northern Rock and Bradford & Bingley following their nationalisation and subsequent restructuring. In other cases, active lenders sold mortgages to inactive lenders. Borrowers who discovered that their lender had become an inactive lender, whether by restructuring or transfer of the mortgage, lost the opportunity to re-mortgage with their existing lender.

These borrowers were often also unable to re-mortgage with other providers as, despite previously qualifying for a mortgage, they did not pass the stricter affordability requirements introduced by the Financial Services Authority (now the FCA) following the global financial crisis. They became trapped being charged interest at a higher level than prevailing rates amongst active lenders in the residential mortgage market. This was even true in cases where borrowers were maintaining their mortgages at higher interest rates. What seems to have happened is that many inactive lenders took advantage of the captive state of their mortgage customers, and the fact that they did not need to compete in the market for new customers, to set their interest rates at a high level.

Borrowers who were unable to re-mortgage had no choice but to pay the high rates set by their inactive lender or face losing their home. They are known as ‘Mortgage Prisoners’. There were and are hundreds of thousands of Mortgage Prisoners in the UK.

Harcus Parker is acting for Mortgage Prisoners to reclaim the difference between the high interest they have paid on their mortgages and the interest they would have paid if the rate had been set by their lender at a lower ‘fair’ level. The amount of compensation due to homeowners who join the litigation could be very significant.

The litigation is free at the point of use. We are acting on a no-win, no-fee basis, and will pay any third-party costs which are necessary in order to progress the claims to trial.

Can I Claim?

You may be eligible to join the claim if you have a residential mortgage (or previously had a residential mortgage) serviced by one of the following:

1. Heliodor Mortgages
2. Landmark Mortgages
3. NRAM Limited

And

• you either have not redeemed your mortgage or did not redeem your mortgage more than six years ago.

Alternatively, you can also sign up if your mortgage was a Northern Rock ‘Together’ mortgage product, consisting of both a mortgage and a linked unsecured personal loan, and

• you redeemed the mortgage more than six years ago; but
• you did not redeem the linked unsecured personal loan more than six years ago.

Harcus Parker will act on a no-win, no-fee basis, and will pay any third-party costs necessary to progress the claims to trial.

It is important that you stay up to date with your mortgage repayments. You should not expect your financial difficulties to be solved by the claim. You must continue to manage your debt carefully, and with proper advice. Organisations like Mind, Step Change and Citizens Advice may be able to help.

The Claims

The claims that the proposed group will allege are as follows:

• a claim for breach of an implied term which states that a lender should not exercise its discretion to set or vary the interest rate dishonestly, for an improper purpose, capriciously, arbitrarily or in a way a reasonable lender acting reasonably would not do; and
• if you had a Northern Rock Together Loan, a claim that the credit agreement comprising the unsecured loan element of the Together Loan, constituted an unfair relationship under the Consumer Credit Act.

Precisely which claims are advanced on behalf of each claimant will depend on the specific circumstances of the claimant.

In each case we will seek to recover by way of damages, the amount of interest that you overpaid on your mortgage.

Why claim? Why does this matter?

Fairness: Because you cannot afford to switch lenders, you are in an acutely vulnerable position from which you cannot escape. We will seek to make your monthly payments more affordable.

Accountability: Lenders have profited at the expense of you and people like you. We will try to obtain compensation on your behalf for any overpayments you have made.

Finance: We believe that this litigation offers the best chance that you and other Mortgage Prisoners have of being compensated for nearly twelve years of overcharging and mismanagement.

Community: You will be joining a group of people similarly affected by the issues. Many of our clients have told us that, before they joined the 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, you will benefit from strength in numbers.

You should not expect your financial difficulties to be solved by the claim. You must continue to manage your debt carefully, and with proper advice. Organisations like Mind, Step Change and Citizens Advice may be able to help.