Stuck with your mortgage? Mortgage prisoners challenge lenders in group legal action

'Mortgage prisoners' are homeowners who are trapped on an expensive mortgage and are unable to get a cheaper deal with other lenders because they don't meet strict borrowing criteria – even though they'd often be paying less if they switched. MoneySavingExpert.com has been fighting their corner for years, but only recently has there been some action from lawmakers and regulators.

Now law firm Harcus Parker says it has begun legal proceedings on behalf of 'mortgage prisoners' who in some cases have been forced to pay more than 5% interest on their mortgage for the past 12 years, at a time when most others have enjoyed low rates.

To be part of the claim, you have to sign up to it – see more details on how to do this below. It's early days and there's certainly no guarantee the claim will be successful. If it is, then Harcus Parker will take slightly more than a third of any payout.

Who could be part of the claim?

Harcus Parker is encouraging people who believe they are mortgage prisoners and who fit the following criteria to register their interest:

• If you are stuck paying a high rate of interest and have been refused a new deal by your lender or are unable to remortgage elsewhere.

• AND if your mortgage was taken out with Northern Rock, Bradford & Bingley or Mortgage Agency Services 1-7.

To register your interest, you need to sign up on the Harcus Parker website and enter some personal details.

You will need to agree to instruct Harcus Parker to act as your solicitors. It will then begin to investigate your claim, including requesting all relevant documents relating to your mortgage from your lender.

Who is the claim against?

Harcus Parker says this claim will be looking to get money from the lenders themselves, and it is the firms which have taken on responsibility for mortgage prisoners' mortgages which have now received a 'letter of claim' as the first stage in legal proceedings.

The law firm said: "We are not looking to bring claims against the Government or the regulator, because the more straightforward wrong, we think, is the unfairly high rates charged."

The way these companies are structured is quite complex. Bradford & Bingley was nationalised after the financial crisis and UK Asset Resolution (UKAR) – a state-owned company – now manages its mortgages.

The old Northern Rock is now called Landmark Mortgages Limited and is owned by an American private equity firm called Cerberus Capital Management. A chunk of Northern Rock's former mortgages are now owned by a company called NRAM Limited and are also managed by UKAR.

Mortgages issued by Mortgage Agency Services 1-7 are now held by Co-op.

UKAR says it has no comment to make on the legal proceedings.

A Co-Op spokesperson said: “We’re making positive progress with our programme to identify and proactively contact customers to review their current circumstances, with the aim of offering alternative mortgage solutions where possible. We continue to work with the wider banking industry on this issue with the purpose to help as many people as we’re able to whilst maintaining our commitment to be a responsible lender.”

We've contacted Cerberus for comment and will update this story when we hear back.

How much could I get?

Group actions like this one can take a long time to play out in court and, put bluntly, they often aren't successful. So definitely don't assume that taking part means you're in line for a big payout – or indeed any payout at all.

The law firm says it's "impossible" to give any precise figures for what individual claimants could get if the legal claim's successful. It says the amount it'll claim on your behalf will depend on factors such as the size of your mortgage, the term of your mortgage and the interest rate you are and have been charged. If the claim is successful – and it's a big if – Harcus Parker estimates some could win as much as £20,000-£30,000.

However, while there's no fee to join the action, if the case is successful Harcus Parker will take a 35% cut of any payout, with VAT (20%) added to this.

The firm also says that if successful, claimants will be required to repay their share of what it calls 'disbursements' – these include things like insurance costs. This is likely to be in the region of £500 per person, though the defendants could be ordered to pay a proportion of the claimants' costs, which would reduce the amount.

Overall, Harcus Parker says it expects claimants to retain around 60% of anything it recovers from the other side, though the more people that join the claim, the less the costs will be.

What are the risks of taking part?

While Harcus Parker says you won't have to pay anything upfront to join the lawsuit, it's important to understand that taking part isn't completely risk-free.

With this kind of group legal action, potential claimants are often advised to check how any lawsuit they join is funded and insured. That's because if the case were to proceed and the court ruled against the claimants, they could technically be liable for the lenders' legal costs.

Harcus Parker says it is fully insured for this eventuality and so the only situation in which claimants could be left liable is if that insurance were to fail – a prospect it says is "very remote". However, joining the case is not without some risk and so you should carefully weigh up the potential pros and cons before signing up.

Is it worth me doing this?

If you feel you fit the situation, there is very little for you to lose at this stage (barring the small risk we outline above) and it at least puts a marker in the sand that there are many unhappy people out there.

What do mortgage prisoners themselves think?

A spokesperson for UK Mortgage Prisoner said: "Having waited a year for the regulator to help, we've been left with no choice but to take legal action. We're still calling on the Government to do right thing and put an end to this injustice.

"If you feel you are a mortgage prisoner, please join our group on Facebook at UK Mortgage Prisoners and join the claim."

What else is being done to help mortgage prisoners?

MoneySavingExpert.com has been fighting for justice for mortgage prisoners for several years now through the route of seeking reform of regulation and laws. Here's a quick recap:

• In 2015, Martin met key figures in the EU, the Treasury and the FCA, which are the organisations responsible for UK mortgage regulations. He attempted to organise a summit between them, to collectively work out who was responsible for the situation and how it could be fixed. Unfortunately, the summit didn't take place.

• In 2016, then-Chancellor George Osborne wrote to mortgage lenders following a meeting with Martin about the plight of mortgage prisoners. However, Martin said the Chancellor's letter only addressed "a fraction of the problem".

• In May 2018, the FCA found 150,000 consumers in the UK were mortgage prisoners. MSE contributed to the regulator's discovery by suggesting and helping facilitate a survey of mortgage brokers. The survey backed up the regulator's findings from analysing mortgage data, and the FCA thanked MSE for its contribution.

  The regulator said it was able to help 30,000 of the mortgage prisoners it identified, whose lenders the FCA could force to help their 'imprisoned' consumers if needed. But the other 120,000 'prisoners' have had their mortgages bought by firms who aren't authorised to lend, and so the FCA has no power to make them do anything.

• In October 2018, Treasury Minister John Glen admitted that mortgages prisoners "need to be dealt with", at an event ran by MoneySavingExpert at the Conservative Party Conference.

  The minister also expressed agreement with Martin's call that an affordability check for someone with an existing mortgage – if it's at a cheaper rate and they're not borrowing more – should be: 'Have you repaid and not defaulted?'

• In March 2019, the FCA launched a consultation detailing its solution to free mortgage prisoners. It proposed that lenders could choose to carry out a more "proportionate" affordability assessment for those who are up to date with their payments, aren't looking to borrow more and are looking for a better mortgage for their current home.

• In July 2019, MSE submitted its response to the FCA consultation, welcoming it, but calling for improvements. Crucially, MSE called on the Government to step in and help those mortgage prisoners beyond the reach of the regulator.

• In October 2019, the FCA removed some barriers that stop mortgage prisoners from finding a cheaper deal – though many will still be left trapped.