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Shared appreciation mortgages under spotlight

The Bank of Scotland and Barclays bank are being taken to court by a group of homeowners who signed up to the company's controversial Shared Appreciation Mortgage (SAM) scheme which was sold in the late 1990s. Under the terms of the agreement homeowners were able to borrow funds and UK remortgages on an interest-free basis with their property used as collateral.

However, the more controversial element of the scheme is the fact that the Bank of Scotland and Barclays bank were entitled to 75% of the value of any appreciation on the customer's property which has seen the average SAM loan triple over the last 10 years. This leaves many homeowners with massive loans to pay off with their only real asset being their property. However, when you consider that 75% of the appreciation from the loan agreement date will go to the likes of Barclays bank and the Bank of Scotland, many customers are now in serious debt.

The schemes are set to be tested in court although as you would expect both Barclays and Bank of Scotland have mobilised the best legal brains in the UK to try and delay the action. With over 8,000 of the original 15,000 customers having died or redeemed their loans, this leaves just 7,000 potential cases, a figure which will drop each year into the future.

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