Lawyers are seeking compensation of at least £150m on behalf of thousands of mortgage borrowers who believe they have been unfairly charged high standard variable rates, after the loans were paid off following the Northern Rock collapse.
Harcus Parker represents more than 200,000 mortgage borrowers who argue that they were stuck in rates around 5 percent for more than a decade, even though interest rates plunged in the aftermath of the financial crisis and hovered near record lows up to a year ago.
US private equity group Cerberus was among the companies that bought Northern Rock’s home loan portfolios after it was nationalized in the 2008 financial crisis. It now owns the mortgages through its Landmark brand. Other companies that bought the Northern Rock mortgages include Topaz Finance Limited, trading as Heliodor Mortgages.
Harcus Parker has argued that these companies did not reduce the standard variable rate on these loans from 5 percent, despite the fact that the Bank of England lowered the base rate to 0.1 percent in 2020.
Matthew Patching, a senior associate at Harcus Parker, said the firm is preparing to sue if the claims are not resolved by then.
The move comes as the Bank of England continues to raise interest rates, forcing standard variable mortgage rates even higher.
“Our customers have been paying high interest rates on their mortgages for nearly 15 years, at a time when the mortgage market as a whole enjoyed unprecedented access to cheap loans,” Patching said. “Now that rates are rising again, our clients are under tremendous pressure, with some facing double-digit interest rates.”
Harcus Parker has already launched proceedings against high street bank TSB over similar concerns that borrowers were left with high rates. TSB bought £3.3bn worth of Northern Rock mortgages covering 27,000 Cerberus owners in 2015, grouping them under its Whistletree brand.
The law firm said TSB continued to charge Whistletree clients a standard variable rate that is more than double the amount it charged its other clients at that rate. A court hearing has been set for March to move forward with a class action order for mortgage customers.
TSB said: “TSB is aware of the possible action proposed by Harcus Parker and will vigorously defend its position.”
The bank added that it created alternative products for Whistletree customers after acquiring the book in 2016, noting that more than two-thirds of customers have since switched. Whistletree’s mortgage transfer product rates have been the same as TSB’s mortgages since April 2020, according to a source familiar with the matter.
Cerberus declined to comment. Heliodor Mortgages did not respond to a request for comment.