Mortgage prisoners will claim up to £30,000 in compensation as the first group legal action begins at the High Court tomorrow, involving TSB’s Whistletree subsidiary.

Harcus Parker says successful cases could open up compensation claims for thousands of former Northern Rock ‘mortgage prisoners’ with average claims estimated to be between £20,000 and £30,000.

The law firm is running the group claim for 2,500 TSB Whistletree mortgage prisoners under no win, no fee agreements.

It will represent 15,000 former Northern Rock mortgage holders in total. 

The mortgage prisoners group action was launched in July 2022 by customers who claim they were locked into mortgages with “excessively high” interest rates.

The court case in London will determine whether TSB has breached the Whistletree mortgage contracts by continuing to charge Whistletree customers their existing standard variable rate when it bought the book, rather than moving them to TSB’s standard variable rate.

It will also determine if the mortgage contracts should be read as including a term to say that any discretion TSB has to set or vary interest rates must not be exercised dishonestly, for an improper purpose, capriciously or in a way in which no reasonable mortgagee, in the context of the parties’ expectations, acting reasonably, would do.

And finally, whether remedies under the Consumer Credit Act would in principle be available in respect of payments made under a customer’s mortgage as well as their unsecured loan, where customers hold a ‘Together Loan’ product.

Following the global financial crash of 2008, the government took over Northern Rock and sold the mortgages it held of an estimated 200,000 homeowners to inactive lenders who have been accused of exploiting customers by charging unfairly high interest rates. 

It has been just over eight years since TSB bought £3.3bn mortgages from Northern Rock.

Since TSB bought the loans, it is said to have charged its Whistletree customers almost double the rates charged to its other customers.

A report commissioned by personal finance expert Martin Lewis estimated that the government made £2.4bn by selling mortgages from collapsed lenders to investment firms.

Harcus Parker argues that these TSB Whistletree mortgage holders have been unfairly exploited and points out that since 2016, they have been forced to pay an additional 2.29% compared to the bank’s standard variable mortgage rate.

Harcus Parker partner Matthew Patching says: “This trial represents the first significant step towards compensation for our clients, who have paid very high interest rates on mortgages for a significant period of time.”

“It’s not just about the money; our clients feel very strongly that there should be recognition that they’ve suffered a terrible injustice.”

But TSB says: “This is a hearing for the court to determine some specific issues that have been raised as part of Harcus Parker’s legal action relating to Whistletree mortgage terms and conditions, in advance of any final trial.

“TSB has always been committed to treating Whistletree customers fairly, and does not believe the claim has merit and is defending it vigorously.”

UK Mortgage Prisoner Action Group lead campaigner Rachel Neale points out: “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 the 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.”