Bank Of Scotland sell Margaret a home loan of £16,750. They'll get back at least £124,000

Apr 20 2008 Additional Reporting By Jane Barrie

House Row 1

MARGARET RAMAGE was looking forward to a stress-free retirement when she ploughed her life savings into buying a house.

But 10 years later she has learned the shocking truth about the loan she has with Bank of Scotland.

She borrowed just £16,750 but today owes them a whopping £124,000.

Furious Margaret said: "The bank have taken my life away. I feel trapped and my retirement is ruined. How can they get away with this?"

Margaret, a former book binder, signed up to a Shared Appreciation Mortgage (SAM) when she divorced in 1997.

Around 15,000 people took out the deals which were available for two years from Bank of Scotland and Barclays .

They were aimed at older people who were offered interest-free cash on the understanding that when the property was sold, the lender would take a slice, generally 75 per cent, of the property's increase in value.

Then, the deals looked attractive. But no one dreamed house prices would double in five years then spiral further.

Margaret, who lives in Edinburgh's Old Town, said: "I was too old for a traditional mortgage as I was just about to retire.

"The SAM deal sounded perfect - no monthly payments and interest-free, though I obviously did not read the small print.

"I thought the bank got 25 per cent of any increase in value, not 75 per cent."

So when Margaret looked into paying off the mortgage in October, nearly 10 years since she had taken it out, she was shocked.

She found to her horror the bank were due 75 per cent of the increase in value plus the £16,750 she originally borrowed.

And as the property has soared in value from £67,000 to £210,000, she owes the bank £107,250, plus the original loan of £16,750 - a total of £124,000.

It means a staggering 640 per cent profit for the bank on their original investment.

Margaret, who invested £51,250, is left with a profit of £34,750, or 67.8 per cent - just over a tenth of the bank's profit rate.

Devastated Margaret said: "I wanted to leave something tomy children and grandchildren. I feel horribly cheated."

I got on to Bank of Scotland but they did not budge an inch.

They insisted Margaret was tied in and said: "In exchange for zero monthly repayments, Mrs Ramage agreed to share a percentage of future growth in the value of her property.

"We have held exploratory discussions about setting up a hardship scheme for borrowers but there is no certainty of a solution."

So Margaret is taking her case to the Ombudsman. She said: "I have to fight this all the way."

And I'll be backing her all the way.

JUDGEFILE

Shared Appreciation Mortgages were sold to 15,000 customers by Bank of Scotland and Barclays in the late '90s.

Borrowers had no monthly repayments to make and no interest to pay.

But the lender was guaranteed a share, often 75 per cent, of the rise in the property's value when sold.

Thousands of people, most of them elderly, lost out on the increase in value under these deals.

Barclays announced a hardship fund last June replacing SAMs with a loan. It could be paid off if a customer moved home or in the event of death.

Hopes were raised that Bank of Scotland would soon follow suit but so far there is no sign of that happening.