Looks like Standard Life has given up trying to be a bank – despite 6 years of profitable operation.

The insurer has sold its Standard Life Bank operation to Barclays, which shelled out £226 million for the acquisition and says it doesn't expect to shed any of the 270 Edinburgh-based staff.  Since the cash price was a 23 per cent discount on the bank's theoretical value, Barclays should be able to afford a spot of leniency on matters like that.

And it looks like they're getting a good deal.  Standard Life Bank has a mortgage book of around 48 per cent loan-to-value ratio, slightly higher than Barclays' at 44 per cent but not by much. The only 100 per cent mortgages in the portfolio were granted to professionals and are therefore considered kosher.  This deal boosts Barclays mortgage book by 10 per cent, so you can see why its head of banking called the acquisition "a great fit".

Why did Standard Life let go of a relatively untroubled mortgage lender with a decent market position before it had recouped all of its set-up costs?  Chief executive Sir Sandy Crombie explained that the board of directors didn't think a further expansion into banking would help the group's long term strategy. 

And what are mortgage borrowers going to be missing?  Standard Life was a reasonably innovative lender.  It made a big splash in the early part of the decade with market-beating interest rates and customer-friendly loan products. It pioneered flexible offset mortgages and long-term fixed-rate mortgages.  Other pioneers will surely rise up to take its place as the mortgage market rumbles back to life, but not everybody catered for those kind of borrowers' needs so well.

Borrowers 'trapped' into repaying a fortune can now sue their lenders

Ever heard of a SAM?

Some borrowers wish they hadn't – but the tables might soon be turned.

SAM stands for Shared Appreciation Mortgage, an idea which must have seemed like a great one at the time...

The concept was straightforward: borrow now at 0%, just share some of the rise in property's value with your lender when you sell.  These deals were introduced in 1997 and were sold to around 12,000 homebuyers before they were phased out a year later. 

However, the problem was twofold: typically the split was 75/25 in favour of the mortgage lender, and borrowers in 1997 simply didn't foresee the huge rises in house prices over the decade to come.

This means that some borrowers are facing repayments of three or four times what they originally borrowed – equivalent to mortgage interest rates of 30 or 40 per cent.  

That's why legal action has just been given the green light.

A group of 326 homeowners with Shared Appreciation Mortgages from Barclays and Bank Of Scotland have been granted a Group Litigation Order from the High Court, meaning they can pursue their claims collectively rather than on a case-by-case basis.  The legal argument hinges on recent changes to the Consumer Credit Act.  Solicitors acting for the group hope to obtain limits on the amounts, or the percentage of the appreciation, that banks can reclaim from borrowers on SAM contracts.

If this first group is successful, it is expected to pave the way for other homeowners to raise SAM counter-claims against their mortgage lenders.

You can see why the claimants are relieved to be able to present their case: imagine if you had borrowed £50,000 on shared appreciation terms, seen a £150,000 increase in your home's value and had to find £115,000 to repay your bank whilst trying to find another home to move to.  It's not quite the same as negative equity, but the effect is much the same.

Besides, entering the market at the right time but then missing out on a share of the steepest rally in house price history is bound to make borrowers keen to atone for their misfortune! 

No comment from either Barclays or Bank Of Scotland yet, but watch this space.

. . . and Lloyds, Barclays and Abbey aren't far behind.

As promised in Spring, the Financial Ombudsman Service (FOS) has just released its "name and shame" list of banks and financial institutions based on how well they resolve customer complaints.

The list tallies only the cases referred to the Financial Ombudsman Service, not total complaints to an institution.  FOS referrals are situations where a customer wasn't happy with the response to their complaint, and there's a wide variance in the numbers of complaints that the FOS upheld on the customer's behalf.  For this reason, the list makes interesting reading for mortgage lenders and borrowers alike.

We'll focus on: 

1. figures for mortgage complaints only—not banking, pensions or insurance;
2. percentages of cases upheld by the FOS, not the overall number of cases (since this depends on the size of the institution, amongs other things).

First thing to note: the industry average for mortgage-related cases is 41 per cent resolved in favour of the customer.  That means that in nearly six out of ten customer complaints, the FOS thought the lender was in the right.  That's not bad for the industry as a whole, compared to the percentages for banking and credit (61%) and insurance (70%). For figures like these, remember lowest means best.

So, who scored worse than average?

GMAC-RFC scored badly on the mortgages list: 75 per cent of complaints to the Ombudsman were upheld.  This typically means that in 3 out of 4 cases the Ombudsman judged that they had either sold the borrower the wrong product, charged them unfairly or done something else that left their customer out of pocket. In each of these cases, restoration means putting the customer back to the position they were in beforehand—for example, repaying charges or interest and moving them to the deal they should have qualified for in the first place.

That 75% figure puts GMAC out in front by quite a long way.  Any comments would be welcome as to why you think this is :)

GE Money (61%) and Preferred Mortgages (58%) came in second and fourth on the list, but they're mingling with three High Street lenders who won't be at all pleased to appear in such company: Lloyds (58%), Barclays (55%) and Abbey (52%).

The only High Street lender to look good out of all of this is Nationwide, whose figure of 28% is lowest on the chart.  However: there are many other lenders who don't chart at all because they had fewer than 30 complaints in the six-month period.  This includes most of the building societies (Skipton, Yorkshire, West Bromwich among them) and some even more surprising omissions: for example, Halifax isn't on the list at all.  Surely some people must have complained about the UK's biggest mortgage lender?

Let us know what you think — especially if you're as unsurprised as we are to see GMAC up there!