Northern Rock’s “mortgage prisoners” are to sue TSB’s subsidiary, Whistletree, in a bid for compensation over alleged inflated interest rates on their loans.
Almost 2,500 borrowers are involved in the legal action.
They claim after selling their home loans to Whistletree, they were charged much higher rates than those on TSB’s standard variable rate (SVR).
TSB’s SVR is 7.25 percent, while Whistletree’s equivalent is 9.54 percent.
The borrowers are part of a larger group of about 47,000 households whose loans with Northern Rock and Bradford & Bingley were transferred after the banks collapsed during the 2008 financial crisis.
Many loans were interest-only, some had self-certified incomes, and others exceeded 100 percent loan-to-value (LTV).
This makes it difficult for these borrowers to secure more affordable mortgage deals, earning them the label of “mortgage prisoners.”
Since 2016, around 27,000 mortgage holders have been transferred to Whistletree.
The borrowers had loans with Northern Rock and Bradford & Bingley, which were transferred after the banks collapsed in 2008
More than two-thirds have switched to a different mortgage or closed their accounts.
However, those still on Whistletree’s SVR have reportedly paid between £15,000 and £30,000 more than they had been on TSB’s standard rate.
The court proceedings started today (Tuesday, July 23) and are expected to last four days.
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It will assess whether the separate SVR for Whistletree customers breached their original Northern Rock contracts and if the rates were set unfairly.
The outcome, expected in the autumn, will determine the next steps for the borrowers.
Rachel Neale, lead campaigner for the UK Mortgage Prisoners Action Group, said: “After six years of tough campaigning for justice, UK Mortgage Prisoners action group hope that Harcus Parker solicitors are successful in this aspect of justice for our members.
“Additionally, we call upon government to right the broader wrongs that only legislative reform can bring about for mortgage prisoners in order to right the wrongs government knowingly enabled.”
