A judge has ruled that West Brom building society was within its rights to increase rates on tracker mortgages despite no change in the Bank of England base rate.
The judgement came just a week after a group of landlords, headed by property investor Mark Alexander, had its case heard in court.
Writing on the Property 118 forum which he runs, Alexander said: “I am extremely disappointed to report that we didn’t get the news we were so desperately hoping to receive.
“The Judge, Mr Justice Teare, ruled that the mortgage company were within their rights to increase the premium (margin) on the rate they charge above the Bank of England base rate. He also ruled that West Bromwich Mortgage Company had the right to call in mortgages with 30 days’ notice. Clearly we are shocked at his decision and we anticipate outrage from the general public too.”
It was in December 2013 when West Brom wrote to about 6,500 borrowers with buy-to-let tracker mortgages to inform them that the interest rate on their loan would rise – despite no change in the Bank of England base rate.
Alexander understood that, after an initial fixed period expired, his mortgage would be pegged at 1.99% above the base rate until the end of the term. But West Brom informed him the margin would change to 3.99% although it later lowered this to 3.49%.
West Brom used a “special conditions” clause in its mortgage terms to increase the rate despite the base rate not changing since it hit an all-time low of 0.5% in March 2009.
The case could open the floodgates for other lenders with a similar clause to up rates on tracker mortgages. Landlords are likely to be a key target as they are less protected than consumers – but owner occupiers could see rates rise too.
Alexander is yet to decide whether to appeal.
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Comments
This is absolutely outrageous and a clearly unfair decision due to breach of contract by the lender. Special conditions is vague and paper thin clause covering everything under the sun and should not have been allowed to justify the move.
This is a warning not to trust the law or the financial institutions in the UK and I for one will not be investing my hard earned money in the UK any more (despite being a proud Englishman).
Regards
Matt
Clearly this judge who will doubtless retire one day on an enormous Civil Service Gold Plated Pension, courtesy of the tax payer, is in thrall to the Government and associates in The Bankering fraternity - not one of whom has ever been prosecuted for Criminally irresponsible behaviour. This is a disgraceful outcome over what is clearly a breach of contract. I seem to recall that the BoE ordered Lenders to treat customers fairly. What happened there? But our Spineless lawmakers and indeed the Chancellor who is obviously in thrall to Bankers and Mortgage Lenders does PRECISELY NOTHING. Methinks I will not be voting for the present ruling party in May!
Absolutely shocking! This judge should be sacked. How can you change the terms of the mortgage just because you want to make more money? Does this mean that borrowers can pay less due to "special conditions"? I didn't think so!