UK Banks Face Legal Action Over Shared Appreciation Mortgages That Have Left Borrowers Deep In Debt

Two of the UK’s banking giants are facing group legal actions over controversial shared appreciation mortgages that have left some borrowers owing up to twenty times more than they originally borrowed. Law firm Teacher Stern is spearheading the cases against Barclays and Bank of Scotland, aiming to secure justice for dozens of current and former customers and their families.

One of the most striking cases is that of Annie Galbraith, who borrowed £33,000 from Barclays in 1998. Now in her eighties, she faces an estimated debt of £660,000 that could rise even higher. These mortgages, offered only by Barclays and Bank of Scotland between late 1996 and mid 1998, were targeted at so-called “asset-rich, cash-poor” older homeowners seeking to unlock value from their property. Typically, borrowers could access up to 25% of their home’s value without making repayments during their lifetime. Instead, they agreed to hand over the original loan plus a significant portion of any increase in the property’s value once the mortgage was repaid or after death.

The calculation was often set at a three-to-one ratio. For instance, borrowing 25% of the property’s value would result in the bank taking 75% of any future appreciation. Soaring house prices over the past two decades have turned what seemed like a lifeline into a financial trap for many, leaving some unable to sell their homes and leaving their heirs a costly burden.

Galbraith’s case illustrates the financial hardship experienced by those affected. After borrowing £33,750 against her Tunbridge Wells home—valued at £135,000 at the time—her outstanding balance is now poised to exceed £678,000, based on a 2022 estate agent’s valuation of £995,000. This includes £645,000, which is 75% of the property’s gain, plus the original loan. According to those close to her, Galbraith is unable to sell her large Victorian house to downsize, as the overwhelming repayment would leave her without enough to buy even a small local bungalow.

Teacher Stern contends the shared appreciation mortgages were fundamentally unfair, trapping borrowers in unmanageable debt. The law firm’s challenge relies on section 140 of the Consumer Credit Act, arguing that these borrower-lender relationships were unjust. Barclays maintains that borrowers were required to seek independent legal advice before signing and that customers still retain full equity and control over the timing of any sale. The bank states it provides dedicated support for those facing hardship. Bank of Scotland, meanwhile, describes the mortgages as specialist products and says all clients were urged to obtain independent financial and legal advice.

Both banks have settled confidentially with some previous customers, avoiding a courtroom judgement on the overall fairness of these controversial products. The new group actions may offer the first real test of their legality and ethics in front of a judge—a move watched closely by financial services professionals and affected families alike.