Mortgage prisoners fight back with legal action

The group has revealed how some of its members suffered family breakdowns, loss of businesses and life-threatening health problems because of the stress they have been put under by their circumstances.

Mortgage prisoners are those people who had mortgages with lenders such as Northern Rock or Bradford & Bingley before the financial crisis is 2008.

Following the crash, these brands were either taken into public ownership and became inactive ‘zombie’ lenders or the loans were sold to other companies.

This meant, when the borrowers reached the end of their fixed-term mortgage, they could not get a new deal and instead defaulted onto the lenders’ expensive standard variable rates – more than 5% and in some cases as much as 15%.

In fact, it meant many borrowers would have been paying well over the odds for the mortgage for the last 12 years, when interest rates have – ironically – been at historic lows.

According to the lawyers representing the mortgage prisoners, this could mean they have been paying out tens of thousands of pounds more than someone who was able to remortgage to a cheaper deal during this time.

Mental health

Rachel Neale, chair of the committee of Mortgage Prisoners, revealed today the group had instructed the law firm, Harcus Parker, to carry out legal proceedings on its behalf.

She said: “This situation has affected my family severely, and made me want to campaign on the issue and organise the group.”

Neale said she has a particular interest in the effect financial problems have on mental health and had been meeting with politicians and major lenders in a bid to try and change their attitude towards people in her position.

“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,” she explained.

More about the claim

The legal claim will be based largely around the fact lenders were required to treat the mortgage prisoners fairly by setting their rates at a fair level.

Harcus Parker said the claim would be made, at this early stage, to Northern Rock and Bradford and Bingley in their current forms, namely NRAM Limited and Mortgage Agency Services Numbers 1 – 7 Limited.

Earlier this year the regulator, the Financial Conduct Authority (FCA) announced proposals to try and make it easier for mortgage prisoners to remortgage. This included encouraging lenders to relax strict affordability tests which currently prevent mortgage prisoners from remortgaging.

However, Harcus Parker said while these changes might help borrowers escape the trap, the legal action provided the only route to redress for those who had lost large amounts of money through high interest rates.

Damon Parker, managing partner of 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.”