Barclays and HBOS face the prospect of a costly court action by thousands of homeowners said to be in financial hardship after taking out shared appreciation mortgages in the late 1990s.

Solicitors gave notice yesterday of their intention to sue the banks on behalf of up to 8,000 homeowners still on the deals.

The mortgages allowed older borrowers to release cash from the equity in their property without paying interest or loan payments during their lifetime.

Solicitors claim the mortgages were 'unfair'. Barclays said it was 'comfortable that it did everything to make sure that customers understood the nature of the product'.

Financial Times