West Bromwich Building Society: Landlords lose case

Posted on Monday, February 2, 2015

A judge has ruled that the West Bromwich 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 the West Bromwich Building Society 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 the West Bromwich Building Society informed him the margin would change to 3.99% although it later lowered this to 3.49%.

The West Bromwich 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.

At the time of writing, Alexander is yet to decide whether to appeal.

Back to News Articles