The West Bromwich Mortgage Company will have to refund £27.5m to thousands of buy-to-let borrowers who had tracker mortgages.
The Appeal Court has ruled that the lender, an arm of the West Bromwich Building Society, was wrong to increase its charges for lifetime buy-to-let tracker mortgages.
In September 2013 West Brom announced in a letter to borrowers a 1.9% increase in its tracker rate, although Bank of England base rates had not risen.
The same letter also suggested that the lender would call in mortgages with just 30 days notice if the West Brom decided they were unprofitable businesses.
Some 6,500 landlords could now receive refunds.
An action was brought by Mark Alexander, a former mortgage broker, backed by around 350 landlords, who believed that they had been sold tracker mortgages on the basis that the interest rate would be fixed to the Bank of England’s base rate, which has stood at 0.5% since March 2009.
The building society argued that its small print allowed it discretion to change the rate.
Alexander lost his case at the High Court, which refused leave to appeal.
Alexander fought on, and won the right to appeal, raising more than £500,000 in backing.
Yesterday, he won at the Court of Appeal, the result automatically applying to other landlords in the same position.
The West Bromwich Building Society said it would record a loss in the current financial year as a result, but insisted that its overall financial position remains strong.
Chief executive Jonathan Westhoff said: “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.”
Alexander said the ruling sent a clear message to other lenders who have acted in a similar manner.
As well as ruling that the West Bromwich Mortgage Company was not entitled to vary interest rates in the absence of a change in Bank of England base rates – which the mortgages were designed to track – the Court of Appeal said that the lender was not entitled to call in mortgages unless they were in arrears.
Treating customers fairly!
The terms were base rate + a fixed amount which the lender reneged upon.
Other lenders have done this, notably the Skipton and Bank of Ireland.
The Financial Services Ombudsman did not act on complaints in any of the cases and the action by Mark Alexander and his team should be applauded.
He is embarking on the creation of a campaign group to support landlords challenge the constant attacks from tax legislation, lenders and local authorities, which we’ll be fully supporting.
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Add Manchester Building Society to the list also. Mark Alexander deserves a knighthood for his dogged determination and sheer hard work in finally achieving what we all knew from the outset could not be defended. In short, many lenders changed the terms of trackers mortgages by relying on very ambiguous wording in offer letters. 2 years into low interest rates some lenders decided that borrowers had had low rates long enough and basically it was eating into their bottom line so, withdrew trackers – from existing borrowers and converted trackers to SVRs. In effect increasing mortgage interest rates from 1.25 to 5.45%! The Financial Ombudsman was not prepared to back the borrower. Instead, they were firmly of the opinion that preserving the profits of the lender trumped the borrower. This should send a message to the overpaid employees in South Quay that it won’t do in future to repeat parrot fashion the mantra of the lender when dismissing complaints by borrowers. Well done Mark.
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