Lloyds Banking Group is being sued by 150 homeowners who were sold mortgages tied to house price appreciation.

The case has been brought against the Bank of Scotland, now part of Lloyds, in the High Court. It pertains to shared appreciation mortgages which were sold to thousands of customers in the late 1990s, the product allowed borrowers to take out a loan against the value of their house provided they paid the bank a percentage of equity growth on the property when it was sold. 

Some mortgage loans allowed homeowners to borrow up to 25 per cent of the value of their homes provided they repaid up to 75 per cent of the property’s value appreciation. 

With the average UK property gaining 369% of value since 1996, when the appreciation mortgages were first sold, the amount borrowers owe to banks has soared. 

Homeowners have been left trapped in their homes as the amount they would receive from a sale would not be enough to buy a new home after repaying the bank.

Teacher Stern LLP, the law firm leading the action, said that in one case a claimant took out a £187,000 loan against their London home in 1998 and now owes the bank £1.6m as the property price soared.

Teacher Stern brought a similar case against Barclays over a similar loan package on behalf of 37 borrowers which was settled out of court in June. 

The Bank of Scotland is not prepared to reach a negotiated settlement as of yet, according to Teacher Stern. 

The Bank of Scotland defended the loans in documents submitted to the High Court which said the relationship between the bank and customers was fair and reflected the amount of risk that the banks took on by providing loans. 

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