Some 12,000 homeowners took up the mortgages with Bank of Scotland and Barclays in the late 1990s, and around 7,000 unhappy customers are estimated to have potential claims worth an average of £100,000.

Borrowers were offered low or zero-interest loans worth 25% of the property value in exchange for the bank taking 75% of any appreciation in value when the property was sold.

The huge jump in house prices means that borrowers owe their banks an average of 4.4 times the amount borrowed, equivalent to an average interest rate of 35% to 40% a year. On a house worth £100,000 in 1998, and now worth £300,000, the homeowner who borrowed £25,000 at zero interest will owe the bank £175,000.

With a SAM where 75% of the value was loaned at a fixed rate of interest, a borrower could now owe the bank £275,000.

Three months ago a High Court judge granted Berkshire solicitors RWP a Group Litigation Order, enabling the firm to combine multiple cases in a single action to test a change in consumer law.

In 2008, the Consumer Credit Act 1974 was amended to cover “unfair relationships” in existing contracts, as opposed to requiring proof of “extortionate” terms.

Lloyds, which said in October it was “considering its options”, has now appealed against the ruling, and has been given permission to proceed. The High Court in London is due to consider the appeal later this month.

RWP has recruited some 130 borrowers for its action, including 15 in Scotland, at an upfront cost of £5,000, which is non-refundable even if the bank wins its appeal. If the appeal fails, the case goes ahead, and the contracts are declared unfair, the bank could be expected to make those litigants an offer of settlement.

Any SAM holder not covered by the case, however, could not expect the bank to offer them compensation.

Hilary Messer, partner at RWP, said the firm had fought to achieve the group order against opposition from the bank, which was still opposing it.

“They know that without this order we can’t help anybody. We can help everybody or nobody, because it is too expensive for any one person to do it.”

Bank of Scotland agrees that “the arguments the SAMs borrowers wish to raise should be brought before a court as quickly and efficiently as possible”. However, it says the mortgage terms were clear to borrowers and that the “one size fits all” nature of a group litigation approach is not appropriate. Barclays says the issuing of the order was “only the first step in the litigation”. It argues the case is without merit.

Many mortgage holders have taken their case to the financial ombudsman, which has always backed the banks’ argument that the mortgage contract terms were agreed.

Both banks have said they will look sympathetically at cases of hardship.

Messer has appealed to Scottish SAM-holders to “at least get in touch” before the appeal if they are considering joining the action once it goes forward.