Sharing seems uncaring

Mr Fisher's house has nearly doubled in value

An interest-free mortgage loan for as long as you like - it sounded too good to be true for one Working Lunch viewer.

And unfortunately it was.

Five years on Harold Fisher is counting the cost of his Shared Appreciation Mortgage (SAM).

Terms

The terms were simple: his lender, Bank of Scotland, gave him £90,000 at 0% interest.

In return, he would have to pay back the money plus 75% of any increase in the value of his house.

That sounded fine - he was told houses would probably rise at around three percent per year.

Harold: feels trapped

Back in 1997 his house was worth £360,000 but since then the price has rocketed to around £700,000.

This was far more than he'd ever imagined, or Bank of Scotland had ever suggested.

It means that if he decides to sell now, he must pay 75% of the £340,000 increase - that's £285,000.

'Trapped'

He says that he and his wife now feel trapped because if they sold up, they would only have enough money to buy a much smaller house.

Harold would like the bank to compromise.

"It requires goodwill to possibly cap the level or even accept a moderation of the terms so that the mortgage could be repaid with a reasonable return to the bank and not such a terrible burden on borrowers," he says.

Of course if the value of the house had gone down, then the Fishers would be sitting pretty.

Acknowledgement

Bank of Scotland has told Harold that it's not at liberty to vary the terms.

But in a statement to Working Lunch the bank did acknowledge the situation Harold and others are in:

the value of property can decrease as well as increase

Bank of Scotland

"If customers are wishing to repay their Shared Appreciation Mortgage at the present time, we recognise that increases in property values over the past five years may mean that they will have to repay more than they initially anticipated.

"Nonetheless, as the value of property can decrease as well as increase, this may not be the case with repayment going forward."

Advice

Mr Fisher was also encouraged by the the bank to consult a solicitor and a financial adviser before committing himself.

Even so he's now considering taking his complaint to the financial ombudsman.

If you are in a similar position you can contact Bank of Scotland by writing to them at:
Bank of Scotland Customer Services
Ettrick House
37 South Gyle Crescent
Edinburgh
EH12 9DS

Shared appreciation mortgages are no longer on sale.