19th
Feb 2016
The landlords taking on the West Bromwich Building Society rate hike will have their case heard at the Court of Appeal on 27 April.
Because of the society’s increase of its tracker rate mortgages in September 2013, the group of landlords are suing the company and although initially the case was turned down, they have been granted their date of Appeal.
Back in September 2013, West Bromwich decided to inform their 6,700 landlord customers that they would hike their interest rates from 1.49% up to 3.49%, to take effect from December 2015.
The building society blamed the rising costs of mortgage funding for the increase and that it had to take this into account; they said that they would and could because changes were permitted under their mortgage agreement terms.
In spite of the building society’s advertising claims that their products would mirror the base rate, the lender stated that within its terms and conditions it was permitted to change interest rates due to market factors, (which was not highlighted in the campaign).
For many landlords who are clients of West Brom it meant that their interest rates would soar to a 100% increase.
The landlord pressure group, which is made up of 400 landlords, funded over half a million pounds for legal costs and launched their legal action against the lender in the High Court in November 2013.
In January 2015 the High Court ruled that the society could by right increase its rates because of market conditions, the landlords pressed for a date of appeal which has finally been given.
Immediately after the ruling, a spokesman for the lender said: “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.”
He also mentioned that the rate had in fact been reduced by 0.5% from 2% down to 1.5% because of “improved market conditions”.
Cotswold Barristers barrister Mark Smith, representing the landlords, said: “Other lenders who have securitised their books and now run the loans at a loss, as West Brom is doing, will scrutinise their conditions closely. Their solvency depends on it. They took a gamble with securitisation, and are now looking to pass the losses to the borrowers.”
A West Bromwich Building Society spokesman said: “We have always maintained that we have acted entirely appropriately and in the best interests of our membership. This position is supported by the decision of the courts last year.”
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