Lawyers are seeking compensation of at least £150 million (€169 million) on behalf of thousands of mortgage borrowers in the UK who believe they have been unfairly charged high standard variable rates, after the loans were snapped up following the collapse of British bank Northern Rock.
London firm Harcus Parker is representing more than 200,000 mortgage borrowers who argue they were kept stuck on rates of about 5 per cent for more than a decade, even though interest rates plunged in the wake of the financial crisis and remained near record lows until a year ago.
US private equity group Cerberus was among the companies that snapped up portfolios of home loans from Northern Rock after it was nationalised in the 2008 financial crisis. It now holds the mortgages through its Landmark brand. Other companies that bought Northern Rock’s mortgages include Topaz Finance Limited, which trades under the name Heliodor Mortgages.
Harcus Parker has argued that these firms did not reduce the standard variable rate on these loans from 5 per cent, even though the Bank of England cut the base rate to as low as 0.1 per cent in 2020.
Matthew Patching, a senior associate at Harcus Parker, said the firm is preparing to sue if claims are not settled first..
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The move comes as the Bank of England continues to increase interest rates, forcing standard variable mortgage rates even higher.
“Our clients have paid high interest rates on their mortgages for almost 15 years, at a time when the mortgage market as a whole enjoyed unprecedented access to cheap lending,” said Patching. “Now that rates are rising again, our clients are coming under acute pressure, with some facing double-digit interest rates.”
Harcus Parker has already issued proceedings against high street bank TSB over similar concerns that borrowers were left on high rates. TSB bought £3.3 billion worth of Northern Rock mortgages covering 27,000 homeowners from Cerberus in 2015, grouping them under its Whistletree brand.
The law firm said TSB continued to charge Whistletree customers a standard variable rate that is more than double the amount it applied to its other customers on such a rate. A court hearing has been set for March to progress with a group litigation order for mortgage customers.
A spokesperson for TSB said: “TSB is aware of potential action proposed by Harcus Parker and will robustly defend its position.”
The bank added that it has created alternative products for Whistletree customers after it acquired the book in 2016, noting that over two-thirds of customers have since switched. Rates on Whistletree mortgage transfer products have been the same as TSB’s mortgages since April 2020, according to a source familiar with the matter.
Cerberus declined to comment. Heliodor Mortgages did not respond to a request for comment. – Copyright The Financial Times Limited 2023
