Landlords Win £27.5m Legal Battle with Lender

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Buy-to-let landlords are to be refunded a total of £27.5 million by the West Bromwich Mortgage Company after court of appeal judges ruled that the lender was wrong to raise tracker rates.

The West Bromwich Mortgage Company is part of the West Bromwich Building Society, one of the largest in the country. They caused a stir back in 2013, when they increased interest rates on their tracker mortgages by 1.9%.

Tracker rate mortgages are supposed to directly follow the Bank of England base rate, remaining a set percentage above it. The base rate has remained at a low of 0.5% for seven years now, and so when West Bromwich raised their rates, the various landlords who were paying them were understandably rather annoyed. Many, who were paying a tracker rate of base rate +0.99% (1.5% total) saw their interest payments more than double as a result.

The rate rise affected around 6,400 customers, according to West Bromwich, all of whom were “landlords of multiple property portfolios”. A spokesman for the lender said at the time: “these changes, which are permitted under the terms and conditions of the accounts, are a reflection of market conditions and the need for us to carry out our business prudently, efficiently and competitively.”

The hike was justified by appealing to a clause in the mortgage agreement that stated that the lender was able to change the rate of interest “to something more in line with the current norm.” The West Bromwich said that they were acting in the interest of their thousands of savers, who had suffered due to low interest rates.

Following the interest rate increase, several affected borrowers, led by former mortgage broker Mark Alexander, formed the Property 118 Action Group and set to work forming a legal case against the West Bromwich.

The case was overturned when it was first brought before the high court but, unperturbed; the action group continued, took the case to the court of appeal and how now won what Alexander described as “a David and Goliath legal battle”.

Spokespeople for the West Bromwich unsurprisingly expressed their disappointment with the verdict. They said: “Although this will result in the society recording a loss for the year to March 2017, underlying profitability is expected to be maintained, and the capital position of the society remains strong, and is significantly in excess of regulatory requirements.”

The chief executive for the 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 interest 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.”

The Property 118 Action Group continues to work with others affected by similar cases, helping landlords to make sure that their legal interests are defended “at a very reasonable price.”

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