They have spoken out as law firm, Harcus Parker, announced it had begun legal proceedings on behalf of more than 200,000 mortgage prisoners, on a ‘no win, no fee’ basis, to redress the losses suffered over the last decade.

Lawyers said it was impossible at this stage to put a figure on the value of the claim, but it was expected to run into many millions of pounds.

Rachel Neale, who chairs the committee of Mortgage Prisoners that has instructed Harcus Parker, said: “This situation has affected my family severely, and made me want to campaign on the issue and organise the group.

Neale said she had a particular interest in the effect financial problems have on mental health and had been meeting with politicians and major lenders in a bid to try and change their attitude towards people in her position.

“By bringing this litigation, I naturally want to help to ensure that we all achieve financial recompense, but I also want to highlight the issues so that others are not affected in the same in future,” she explained.

Fair treatment

The case, said Harcus Parker, would be based largely around the fact lenders were required to treat the mortgage prisoners fairly by setting their rates at a fair level.

It said among the 200,000 it was representing were people whose families have been broken apart, who had lost their businesses and who had suffered sometimes life-threatening health problems because of the high cost of their mortgages and the strain they are put under as a result.

The defendants, identified at this early stage, are Northern Rock and Bradford and Bingley in their current forms, namely NRAM Limited and Mortgage Agency Services Numbers 1 – 7 Limited.

What used to be Northern Rock Company is now called Landmark Mortgages Limited and is owned by an American private equity company called Cerberus Capital Management.

Bradford & Bingley, and its subsidiary Mortgage Express, along with NRAM Limited are still in government ownership and Mortgage Agency Services Numbers 1 – 7 are still owned by the Co-operative Bank.

Escape and redress

Earlier this year the regulator, the Financial Conduct Authority (FCA), announced proposals to try and make it easier for mortgage prisoners to remortgage. This included encouraging lenders to relax strict affordability tests which currently prevent mortgage prisoners from remortgaging.

However, Harcus Parker said while these changes might help borrowers escape the trap, the legal action provided the only route to redress for those who had lost large amounts of money through high interest rates.

Damon Parker, managing partner of Harcus Parker, said: “Our clients are regular, hard-working people who have done nothing wrong. Nevertheless, they have been unfairly treated and stigmatised by the failings of the banking system.

“Many of our clients have told us that, before they joined our group, they thought they were alone.

“Many have felt ashamed about being in financial hardship and of the impact it has had on their families. By bringing a claim as part of a group, they are benefiting from strength in numbers.”

Campaigners

Paul Broadhead, head of mortgages at the Building Societies Association (BSA) has been an ardent campaigner on behalf of the mortgage prisoners and he revealed in October, at the MFG Conference, that despite a ‘groundswell’ of concerns and the matter becoming a cross parliamentary issue, there were still no solutions.

Speaking today following the launch of the legal action, he said: “The launch of this action very much underlines the need for the FCA perimeter to be extended so that consumers whose mortgage is sold to an unregulated mortgage book owner have the same consumer protections as borrowers with a regulated lender.

“This is something that we have been calling for since June.”