350 landlords have lost a court battle against West Bromwich Building Society, after they tried to appeal against the decision to increase tracker mortgage rates for customers with a buy to let mortgage.
Led by Mark Alexander, a property investor, the group of landlords accused the building society of increasing the interest rate on the mortgages in question in an illegal manner.
The Commercial Court heard the case last week in London, but Mr Justice Teare rejected the claim of the group.
The claim stated that the building society had no right to increase the interest rates on the tracker loans in December 2013, as the Bank of England base rate had remained constant at 0.5%.
Mark Smith, of Cotswold Barristers, argued that the borrowers should have been protected, due to the nature of their mortgages, against discretionary rises in interest rates.
However, the court ruled in favour of West Bromwich, which said that there was a clause in the terms and conditions of the mortgage contract which lets it increase the interest rates to reflect the market.
Tracker mortgages are supposed to only change the interest rates in line with the base rate, and the lender makes money from setting the interest on the mortgage a margin above the base rate. The base rate currently sits at 0.5%, and, for example, a tracker mortgage could be set at 0.9%, so the lender makes 0.4% in interest. Both the base rate and mortgage interest rate would rise and fall identically so the lender makes 0.4% no matter what, until the loan is fully paid off.
However, West Bromwich raised the interest rate by a reported 2 percentage points, which doubled the mortgage payments some landlords were paying per month, on each property. This is what the landlord group were appealing against. “It seems that a base rate tracker mortgage does not need to track the base rate at all, so why did we buy it in the first place and pay more for this type of loan?” said one professional landlord, Emma Hughes.
“As a family we have had to fundamentally rethink our future in order to second-guess the arbitrary decisions of the mortgage companies.”
