Thousands of landlords will be refunded about £27.5 million after West Bromwich Mortgage Company, a subsidiary of West Bromwich Building Society, was found guilty of unfairly upping the rate on its buy-to-let tracker mortgages.
In September 2013, West Bromwich Mortgage Company wrote to 6,415 multi-property buy-to-let mortgage borrowers who took out a mortgage with the lender prior to 2008, advising them that their lifetime buy-to-let tracker mortgages would go up by 1.9%.
This was despite the fact that tracker rates are meant to follow the Bank of England base rate, which has remained at 0.5% since 2009.
The increased rate of 1.9% was applied from 1 December 2013. This sum gradually reduced until it was 1.1% at the time of the judgement.
But the Court of Appeal has this week ruled in favour of borrowers after Mark Robert Alexander, a former mortgage broker who set up the Property 118 Action Group, challenged an earlier decision made against him in the case.
Writing on Property118’s website, Mr Alexander says: “West Bromwich Mortgage Company was not legally entitled to vary our mortgage interest rates in the absence of a change in the Bank of England base rates which our mortgages track ‘to the term end’.
“This ruling sends a clear message to other lenders who have acted in a similar manner, and to those who might have been considering following suit. There are thought to be in the region of one million tracker buy-to-let mortgages, which could have been affected in this case had gone the wrong way,” he adds.
West Bromwich Building Society says all affected borrowers, including those who have since paid off their mortgages, will receive a letter today confirming that they will get a refund. It says it has already allocated capital to cover reimbursement costs.
Jonathan Westhoff, the society’s chief executive, says: “Naturally, we are disappointed by the decision of the Court of Appeal. At all times, we acted to ensure we were treating customers fairly and that our approach was in the best interests of the Society and its members as a whole.”