Landlords have won an appeal against the West Bromwich Building Society after it raised its tracker mortgage rates despite no movement in the Bank Rate.
The Court of Appeal has ruled that West Bromwich Building Society was not legally entitled to vary mortgage interest rates in the absence of a change in the Bank of England base rate or call in loans at short notice.
The Society has agreed to pay back borrowers approximately £27.5 million.
The case was brought by property investor Mark Alexander who launched the appeal on behalf of 400 borrowers after losing a previous High Court claim in January 2015. The decision affects landlords who took out their mortgage before 2008.
The Society raised its rates on tracker mortgages for 6,250 borrowers in December 2013 by almost two percentage points. This meant that the repayments charged nearly doubled.
Tracker mortgages are supposed to rise and fall in line with the Bank of England base rate, which has been at its historic low of 0.5% since March 2009.
West Bromwich argued that in the smallprint of its contract it was entitled to raise its rates to reflect market conditions even when there was no movement in the base rate.
Jonathan Westhoff, chief executive of West Bromwich Building Society, said: “Naturally we are disappointed by today’s decision from the Court of Appeal. At all times we acted to ensure we were treating customers fairly and that our approach was in the best interests of the Society and its members as a whole.
“We will now contact all affected borrowers and ensure we process promptly any reimbursement they are due. In line with our prudent approach to managing the Society we had already allocated capital to cover this unexpected outcome and so the Society remains in a strong financial position.”
Alexander, founder of landlord portal Property118, said: “This ruling sends a clear message to other lenders who have acted in a similar manner, and to those who might have been considering following suit. There are thought to be in the region of one million tracker buy-to-let mortgages which could have been affected in this case had gone the wrong way.
“I am extremely grateful to all of the Property118 Action Group members who didn’t lose faith in our quest for justice. My win will now be automatically applied to them due to the fact they were represented by my case. It remains to be seen as to whether West Brom will apply the ruling to borrowers who were not represented by my case.”
Loading ...