View more on these topics

Lenders face legal action after landmark West Brom ruling


Angry customers of Skipton Building Society and Bank of Ireland will start legal action against the lenders next month as the fallout continues from a landmark court case on tracker rates.

Manchester Building Society will escape claims for now, despite having been named in discussions earlier in the year.

In June, the Court of Appeal found in favour of landlord group Property 118, which had argued that West Brom had wrongly raised interest rates on some tracker loans without a rise in the Bank of England base rate (see box below).

West Brom repaid £27.5m of overpaid interest to its customers and the outcome was claimed by some to set a precedent for how the wider mortgage market can treat interest rates.

In the aftermath of the West Brom case, Property 118 said it believed Skipton, BoI and Manchester Building Society had treated their customers in a similar way regarding tracker rates.

The landlord group then set up Property 118 Action Group, also in June, to galvanise borrowers into legal action.

Property 118 is using a crowdfunding website to build a war chest to sue lenders that acted in a similar way to West Brom. The group hit its initial £60,000 target last week and has set a second target of £100,000.

Property 118 founder Mark Alexander now says the group has suspended its plans to pursue Manchester due to insufficient data and complaints.

But he adds: “We’re going to commence legal action against Skipton and the Bank of Ireland next month, in terms of issuing pre-action protocol letters.”

These letters are the first steps to bringing a civil claim. The exchange is designed to reveal information about the claim and enable parties to settle their differences if possible.

But the process looks set to be arduous as both Skipton and BoI refute the claim that the outcome of the West Brom case is applicable to them.

A Skipton spokesman says: “Skipton remains firmly of the opinion that, under the terms and conditions of its mortgage offer, it lawfully had the right to remove the standard variable rate ceiling that applied until 1 March 2010.

“The recent decision of the Court of Appeal in the Alexander v West Bromwich Mortgage Company Ltd case was very fact specific regarding an inconsistency in mortgage documentation. No such inconsistency can exist with Skipton’s documentation because the relevant key terms were very clearly and fairly laid out in only one document, being the mortgage offer.”

A BoI spokeswoman adds: “The West Bromwich case is not com­parable to Bank of Ireland UK.

“BoI’s offer document and mortgage terms and conditions expressly stipulated that the tracking margin or differential could be varied, and the offer and mortgage conditions documents are consistent, allowing for the differential to be lawfully changed.”

Skipton hiked its standard variable rate on residential mortgages from 3.5 per cent to 4.95 per cent in 2010 and BoI raised rates for 13,500 base rate tracker mortgage customers in February 2013.

Property 118 members tried taking cases against BoI and Skipton to the Financial Ombudsman Service between 2010 and 2015 but these were rejected.

Alexander says: “By our assessment, there is £600m of overpayments to be refunded when we get to the same stage we are with the West Brom with those two.”

Alexander says the FOS rulings mean that, in order to gain redress via the ombudsman, customers would have to pursue claims against brokers.

He says he is persuading his members not to do this and instead wants brokers and insurers to rally to his cause and fund civil action against lenders.

He says: “We’re trying to hold them back. They only need one win and that will open the floodgates.”

Alexander says there are 150,000 potential claims against BoI and Skipton, implying a wave of potential claims against brokers. He says: “If one broker is found to have given bad advice and has to pay the full £15,000 compensation, all of a sudden you’ve got 150,000 claims that would pile into the FOS on the back of that.

“That could decimate the mortgage broking industry. It could certainly mess up the PI insurers.”

Background to case against West Brom

Property 118 questioned a West Brom decision in September 2013 to raise its tracker rate without a base rate rise.

At the time, the lender told 6,700 landlords it would increase rates from 1.49 per cent to 3.49 per cent from 1 December 2013. The borrowers all had loans with West Bromwich Mortgage Company, its now defunct specialist lending arm.

Property 118 started legal action against West Brom in the High Court in November 2013. Judge Nigel Teare sided with West Brom in January 2015, saying the lender was allowed to increase its rates to handle changing market conditions.

Teare threw out Property 118’s case, and the landlord group appealed.

In June this year, the Appeal Court found that West Brom had been wrong to raise rates in the way it had, and that it should not have claimed the right to call in its mortgages with one month’s notice.



Nic Cicutti: Mortgage lending rules do not reflect reality

Advisers will often tell the key moments of contact between themselves and potential clients tend to be at the point of life-changing events – retirement planning perhaps, marriage, the birth of a child, or buying one’s first home. For many financial writers these are events we most often experience vicariously, through the prism of our […]


‘Fixed rate mortgage deals set to get cheaper post-Brexit’

Fixed rate mortgages could fall further still following the UK’s vote to leave the EU, according to John Charcol senior technical manager Ray Boulger. The past week has seen HSBC launch a two-year fixed rate at just 0.99 per cent, albeit with a £1,495 fee. Boulger says: “The price of government stock will rise, hence […]


Kensington launches mortgage range for high-net-worths

Kensington Mortgages has launched Premier, a range of high value loans called for borrowers needing more than £500,000. The range is aimed at borrowers with complex incomes and high service expectations. The new range offers loans up to £2m, including a maximum limit of £1m for first time buyers. Loans up to a maximum 75 […]

The Rubik’s Cube: China’s policy trilemma

By Douglas Turnbull, Investment Director, Head of Chinese Equities China faces a ‘Rubik’s Cube’ policy trilemma, whereby it needs to sustain a minimum acceptable level of growth, deal with issues such as overcapacity and reform the financial system to make it a far more efficient allocator of capital. Given the contradictory nature of these objectives, […]


News and expert analysis straight to your inbox

Sign up


There are 2 comments at the moment, we would love to hear your opinion too.

  1. If the Skipton and BoI have clear conditions built into their contracts allowing them to make the changes they made, the West Brom decision is not relevant to these cases.

    Is this caused by ambulance-chasers?

  2. wait until 13K borrowers turns into 30k mortgage prisoners making a legitimate claim of blatant over charging I see that war chest quickly growing. A late provision by the spanish bank and brexit partner to provide extended mortgages for the elderly/retired with interest mortgages only is too little too late for most.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm