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Last Updated: Saturday, 5 May 2007, 13:29 GMT 14:29 UK
Help for elderly in mortgage trap
By Bob Howard
BBC Radio 4's Money Box

Members of SAFE protest at the Treasury (photo: SAFE)
Around 11,000 people took out the mortgages in the late 1990s

People unable to move home because of a deal they did with their bank 10 years ago have been given fresh hope.

Barclays is setting up a hardship fund to help some customers who took out Shared Appreciation Mortgages in the late 1990s.

Under the deal customers were able to borrow around a quarter of the value of their property.

But when they sell they must also pay back 75% of the increase in value, leaving many unable to buy a new home.

Reg Baylis and his wife borrowed 20,000 from Barclays to renovate their cottage nine years ago.

Speaking to Radio 4's Money Box, he said the amount he had to pay back when he sold his house for 185,000 in January was exorbitant.

"When I lost my wife, I thought if I sell it now, I'll be able to buy a little flat. But of course when it came to the crunch, I ended up paying back 96,680 for a 20,000 loan."

Mr Bayliss has now bought a mobile home which he says is all he can afford with the money he has left from the sale.

Hardship scheme

Barclays sold the deals directly to around 3,000 older customers.

Eight thousand customers took out the same sort of agreement with Bank of Scotland, although they signed up through independent financial advisers rather than the bank itself.

Hilary and Dennis Ash borrowed 40,000 from Bank of Scotland.

They estimated they will have to pay back 200,000 when they sell.

"We're forced to stay here," Mrs Ash said. "If we sold it at 400,000, the sum remaining for us to buy something would be 187,000."

If they don't accept responsibility for a bad product, why should customers go to them for their new products
Elaine Williams, SAFE

Both banks have always insisted that the implications of buying a Shared Appreciation Mortgage were clearly spelt out in their terms and conditions.

But now Barclays has told Money Box it will officially announce the hardship scheme in June.

The bank says it will be designed to help the older people the mortgages were targeted at, who as they grow more elderly may need to move, or install things like stair lifts or a downstairs toilet.

Elaine Williams is a director of the campaigning group SAFE (Struggle Against Financial Exploitation), which is trying to help people who took out these types of mortgages.

She helped negotiate the Barclays deal but thinks both Barclays and Bank of Scotland should be offering a lot more.

She said: "If they don't accept responsibility for a bad product, why should customers go to them for their new products?"

Bank of Scotland told Money Box it has no plans to introduce its own hardship scheme.

BBC Radio 4's Money Box was broadcast on Saturday, 5 May 2007 at 1204 BST.

The programme was repeated on Sunday, 6 May 2007 at 2102 BST.

The BBC's Bob Howard reports on the mortgage trap

Money Box



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