The West Bromwich Mortgage Company has been forced to refund £27.5m to thousands of buy-to-let landlords who had taken out tracker mortgages.
The Court of Appeal has ruled that the mortgage 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, the mortgage lender announced in a letter to borrowers that its tracker rate would rise by 1.9%, despite the Bank of England (BoE) base rate staying the same.
Mortgage Lenders Forced to Refund £27.5m to Buy-to-Let Landlords
The same letter also suggested that the lender would call in mortgages with just 30 days’ notice if the firm decided they were unprofitable businesses.
Around 6,500 landlords could now receive refunds.
Action against the lender was taken by Mark Alexander, a former mortgage broker who was backed by 350 landlords, who believes that they had been sold tracker mortgages on the basis that the interest rate would be fixed to the BoE’s base rate, which has remained at 0.5% since March 2009.
The lender argued that its small print allowed it discretion to change the rate.
Alexander lost his case at the High Court. However, he won the right to appeal, raising more than £500,000 in backing.
Yesterday, he won at the Court of Appeal, with the result automatically applying to other landlords in the same position.
The West Bromwich Building Society said that it would record a loss in the current financial year as a result, but insisted that its overall financial position remains strong.
The Chief Executive of the firm, Jonathan Westhoff, stated: “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.”1
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 the BoE base rate – which the mortgages were designed to track – the Court of Appeal also said that the lender was not entitled to call in mortgages unless they were in arrears.
1 http://www.westbrom.co.uk/your-society/news/2016/6/8/statement-regarding-court-of-appeal-judgement