In a landmark judgement at the Court of Appeal, West Bromwich Building Society has lost a long running legal case brought against it by a group of private landlords and which will now cost the lender at least £27 million.
This recent verdict in the Appeal Court from three judges overturns a High Court hearing which had previously found in favour of the building society rejecting the claims made by a group of landlords led by a former mortgage broker Mark Alexander, who recently left the UK to reside in Malta.
The action group via Property 118 were acting on behalf of 6700 landlords with West Bromwich and who had tracker rate mortgages linked to the Bank of England (BOE) base rate which has stayed at just 0.5% since 2009.
The legal challenge began in 2014 as a result of a decision in December 2013 by the building society, raising its rate on tracker mortgages for borrowers with at least three buy to let mortgages, stating that in their contracts it could vary the rate 'to reflect market conditions'.
West Bromwich then increased its rates by 2%, which resulted in some landlords with buy-to-let mortgages seeing their monthly repayments increase by 100% or more.
In recent years, other lenders including Skipton B.S. and Bank of Ireland (Bristol and West) have pushed through increases to interest rates onto their borrowers claiming that this was justified and allowed within the terms and conditions of mortgage contracts.
After the recent verdict, West Bromwich B.S. in a post hearing statement said: 'While we are disappointed, we accept the Court of Appeal's decision and so will be contacting all affected borrowers, including those who were not part of this action, to advise them of the outcome and that we will be reimbursing them any additional interest charged. The one-off cost of this will be approximately £27.5m."
Landlord David Lawrenson from the consultancy Letting Focus has been a strong supporter of the campaign against West Bromwich and after the Appeal Court announcement he said:
"Three years ago, landlords could never believe that a lender would try to implement something that was so wrong as to blatantly try to renege on a lifetime tracker by attempting to invoke terms in some obscure small print, which clearly were never intended to apply to buy to let mortgages.
"The result of the case puts the Financial Ombudsman Service (FOS) and the Financial Conduct Authority (FCA) in a very bad light indeed. They failed to help affected borrowers, leaving to them to have to go through an arduous court process – indeed all the way to Appeal Court to get justice, at a cost of around half a million pounds, which fortunately, West Brom will now have to shoulder."
Commenting on the possibility that this judgement may set a legal precedent which could be applied to some other lenders such as Bank of Ireland who have controversially changed their rates on tracker rate mortgages, Mr Lawrenson said: "For all mortgage lenders, they will now realise that they cannot renege on validly and fairly entered into contract terms. I hope the Council of Mortgage Lenders is also watching."
