Mortgage prisoners launch £800m class action against TSB

TSB Bank is set to face a lawsuit worth up to £800million today, brought by customers who claim they were locked into mortgages with ‘excessively high’ interest rates.

The legal action will see around 200 homeowners whose mortgages were administered by the TSB’s Whistletree brand claim around £50,000 each in overpaid interest.

Today marks six years since the TSB purchased £3.3billion from Northern Rock.

Harcus Parker, which is the law firm taking the case to the High Court, says up to 27,000 people could ultimately join the litigation over Whistletree’s claims.

Since TSB purchased the loans, it has reportedly charged its Whistletree customers almost double the rates charged to its other customers.

Until recently, TSB would also have refused to allow these “mortgage prisoners” to access TSB’s regular fixed rate offerings on the same basis as its other customers.

Commenting on the case, Harcus Parker’s senior partner, Matthew Patching, said: “Our clients have been treated terribly by the TSB: they have been charged interest on their mortgages at rates significantly higher than those charged to other similar customers of the same bank”.

“It has had a real and devastating impact on the lives of homeowners who, apart from taking out a mortgage with Northern Rock before the global financial crisis, are often the same as many of TSB’s other clients.”

Harcus Parker says many of these borrowers have spotless repayment histories, but haven’t been able to switch to another lender because they wouldn’t qualify for the tougher new affordability requirements imposed by regulators.

In a letter seen by Harcus Parker, a landlord who had asked to upgrade to a more competitive rate was told by the bank that “although Whistletree is owned by TSB, the two companies are separate entities”.

According to the law firm, anyone whose mortgage was administered by “Whistletree” is eligible to claim.

It also notes that customers who took out a “Together Mortgage”, which allowed borrowers to access loans of up to 125% of the value of their home, may be able to claim additional compensation.

Patching explains: “Together Mortgage was a particularly toxic product. It seemed to allow borrowers to take out an unsecured loan, alongside a mortgage, at a reasonable interest rate, but there was a catch: if the mortgage was paid off or the borrower changed lenders, the interest charged on a linked loan of up to £30,000 would increase by up to 8%”.

At the hearing in the autumn, the Chancery Division of the High Court will be asked to issue a class-litigation order, consolidating the claims and allowing anyone who has previously had a mortgage administered by Whistletree to seek compensation.

Patching adds: “It’s no surprise that – from what we can tell – Whistletree’s mortgage portfolio has comfortably produced more profit for the bank than its ‘regular’ mortgages.

“Many of our clients have never been in arrears or overdue, but have been told by a reputable bank for a long time that they cannot access TSB mortgage rates and have to pay instead a very high Whistletree Standard Variable Rate. Rate (SVR).”

“This violated the express and implied terms of the mortgage agreements and the TSB’s regulatory obligation to treat its customers fairly,” he adds.

Commenting on the case, a The TSB Bank spokesman said: “TSB is aware of the potential action proposed by Harcus Parker and will vigorously defend its position.”

“We are committed to treating our Whistletree customers fairly. TSB took ownership of Whistletree Mortgages in 2016 and later created access to product transfers for customers who previously did not have access. Since then, more than two-thirds of Whistletree customers have either switched to a new Whistletree product or closed their mortgage with Whistletree. We write to customers twice a year to remind them of the possibility of changing suppliers. »

Meanwhile, Rachel Neale, head of the UK Mortgage Prisoners campaign, said: ‘Mortgage prisoners finally have a voice against the continuing injustice we find ourselves in and have been in for over a decade.’ Mortgage prisoners are not treated fairly and have not been since the sale of Northern Rock books to various funds. The government must act to help mortgage prisoners, as must the industry.

Earlier this month, following the resignation of Economic Secretary to the Treasury John Glen, Neale said the organization looks forward to the issue of mortgage prisoners being “examined with fresh eyes”.

She also stressed that UK Mortgage Prisoners are keen to have “urgent engagement with the new Minister”.

Prior to his departure, Glen announced that the UK government would not cap the SVR charged by inactive companies at help the 47,000 mortgage prisoners.

The comments were made by Glen in a written statement to Shadow Minister Chris Evans after he was asked if he plans to cap SVRs for inactive lenders to protect people who cannot move their mortgages.

Glen said capping SVRs charged by inactive businesses would be “unprecedented intervention in the market and undermine the principle of risk-based pricing that underpins the mortgage market.”

He suggested that a cap “would pose risks to the financial stability of companies” which, he said, “could not vary their rates according to their funding costs and would be deeply unfair to borrowers in the mortgage market in the sense broad who pay similar rates to mortgage prisoners”.

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