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West Brom wins High Court battle over buy-to-let rate hike

The West Brom Building Society has won its High Court battle against a group of landlords over a tracker rate hike.

A High Court judge today ruled in favour of the building society after it increased its buy-to-let tracker rate by 2 per cent.

In September 2013, West Brom told 6,700 of its buy-to-let tracker customers their rates will increase by 2 per cent on 1 December.

The borrowers all have mortgages with West Bromwich Mortgage Company, its now closed specialist lending arm, and own multiple properties.

A class action attracted more than 400 individuals who argued the decision breached their contractual rights. They each paid £1,144 raising more than £500,000.

A West Brom spokesman says: “We have always maintained that we acted entirely within the terms and conditions of these buy-to-let mortgages and the court’s ruling wholly justifies our position. The increase was made to reflect changing market conditions and the need for us to carry out our business prudently, efficiently and competitively and in the best interests of our members. 

“We have approached this in a fair manner, passing on any improvements in market conditions by reducing the additional percentage borrowers have to pay.”

The spokesman says that since the rate hike was announced, it has reduced from 2 per cent to 1.5 per cent, due to “improved market conditions”. 

Property118.com owner Mark Alexander, who lead the action, says the landlords plan to appeal the decision. 

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Comments

There are 13 comments at the moment, we would love to hear your opinion too.

  1. Well done Judges at least they got this one absolutely right. Lets hope that the 400 individuals are not given leave to appeal to the House of Lords as we could have another poor judgement from the Law Lords just like that regarding the Equitable!

    Hopefully landlords will see the light and start selling up as monetary Rent Controls are next as well as much longer leases to tenants. Once these are in place then hopefully the Treasury will start to reduce the £12.8 billion tax relief on BTL mortgage interest to finally “kill off” the BTL mortgage market. This is the only way “generation rent” are ever going to be able to afford to purchase property. With fewer students and hopefully much less immigration we will need far fewer than 1.2 million landlords in any event and they provide no service to the community.

    More politicians need to appreciate this and start targeting young voters with these type of policies on BTL as “Help to Buy” is not enough particularly in London and the South East. Giving money to well off “old farts” like me and my generation through winter fuel and other allowances is wrong. It is only sanctioned in order to buy votes.

  2. Good news, buying a house with a mortgage you read the mortgage terms. It’s not rocket science, I can’t believe they got suckered into the lawsuit. The lawyers must of made a killing.

    Lets see if they have an appeal and throw more money away on bad legal advice.

  3. Of course it’s not rocket science, however, when the mortgage offer states that this is a bank base rate tracker that tracks the bank of england base rate at +1.99% then at the present time you expect that rate to be 2.49%. These are very worrying times for anybody on a tracker rate as most lenders have the same terms and conditions hidden away in the small print of an additional booklet. If this judgement were to set a precedent then any lender could change any rate at any time by citing “adverse conditions in the market”. Whilst it is unlikely that many of the major lenders would invoke such a clause it is there for them to use. This isn’t just about landlords it’s about anybody with a mortgage. A sad day for the West Bromwich and a worrying time for everybody.

  4. Now if BTL was regulated the FCA would no doubt be challenging the lender on the basis that key terms such as the right to change the basis of the rate was hidden and not highlighted, thus failing TCF and the need to be clear, fair and not misleading. Don’t think hiding it away in the smallprint of an associated document meets expectations here.

    The question that the FCA should now consider is whether, in acting in such an underhand way so as to conceal a key term in the smallprint of a large set of standard T&C’s, the individuals who signed this off as acceptable are fit and proper persons to run a regulated entitiy.

    From the borrowers perspective they ought to consider if their solicitor fulfilled his duty to them in ensuring they understood the terms of the mortgage they were entering into before they signed it. Being a bit cynical I doubt they even read the T&C’s booklet, just like the applicants!!

  5. Angry Broker, most of the BTL borrowers with the West Bromwich are still receiving yields of over 10% so they have nothing to “cry about”. They were being greedy and hopefully they will have a lot more worries after the election when lease terms will increase to 3 years and maximum rents will be imposed.

    BTL investors have had a good run over the last 20 years it is time for them to get out of the market and let “generation rent” be able to purchase. You will still have a lot of business from FTBs rather than BTL clients.

  6. In replt to Colin Clot.Putting aside your issues with landlords, the issue is that the West Bromwich did not treat people fairly and the FCA and the FOS just sat back and did nothing. Which ever way you look at it the West Bromwich have acted shamefully. Most Brokers are involved in Buy to Let and they will be looking very hard at which lenders they can trust in the future.

  7. Without having seen the mortgage illustrations I may be missing something but I am inclined towards Angry Broker’s view. If it’s a tracker mortgage then you expect it to track the base rate. How would anyone like it if they were invested in a West Brom FTSE Tracker Fund and the market rose 10%, but the fund went down because West Brom took the money and cited “changing market conditions”?

    Whether buy to let landlords are a social evil is irrelevant, if you actually believe that, then campaign for the government to seize their property by force and distribute them to “generation rent”. And if you aren’t prepared to follow your beliefs to their logical conclusion then rethink them. Denying B2L landlords their rights under contract law is not an honest solution to the housing problem.

  8. A disgusting judgement and should be challenged. If these mortgages were sold as lifetime trackers than that’s what they should be.

  9. What are mortgage terms anyway? When I queried a change of Terms & Conditions announced by Barclays/Woolwich on my mortgage taken over by them from Standard Life, I was told by them that there was nothing I could do about it.

    T&C’s that allow changes to be imposed by one party on the other party after the deal is done are a curse of modern life. It gets worse when the seller is not regulated.

  10. The additional mortgage interest charged by West Bromwich has been mainly paid for by the taxpayer in any event so I fail to understand the concerns of the plaintiffs!

    The Building Societies stated in their terms and conditions that they had the right to change the terms but landlords failed to read them. In addition interest rates are the lowest for 400 years and the Building Society has a right to remain solvent and make a return for it members. Landlords have made huge capital gains in recent years because of QE which has created an asset bubble as well as reduced interest rates therefore they cannot expect to have their “cake and eat it”! QED.

  11. If a product provider deliberately tries to conceal important information it can void the contract. How can you have a valid contract that states the mortgage will track base rate for the term of the mortgage and then say somewhere else it will not track the base rate for the term of the mortgage?

  12. This is sharp practice.

    Skipton did the same in February 2010 raising svr from 3.5% to 4.95% citing ‘exceptional circumstances’, then within a couple of years Skipton boasted high profits.

    None of the borrowers with hiked rates saw them reduce when Skipton’s times were better.

  13. If landlords can’t be bothered to read the terms and conditions then the fault is with them not the lender.

    Just because the landlords are too stupid or too lazy to read them then they deserve to lose their case. Its sickening how much they have been bailed out at the expense of savers and yet they still moan. I say tax and regulate these cowboys.

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