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Buy to let investors lose high court battle over tracker mortgage rate rise
Buy-to-let investors who fought their building society lender against a tracker mortgage rate rise have lost their case in court.
Last week, a judge ruled small print in West Bromwich Building Society’s terms and conditions allowed it to hike the cost of repayments for borrowers to reflect market conditions - even without a Bank of England base rate change.
It has triggered concern other lenders could use the ruling to raise rates for other borrowers in the less-regulated buy-to-let sector.
In December 2013, the West Midlands-based mutual raised the interest rate for thousands of borrowers with tracker mortgages by two percentage points. It blamed the higher cost of mortgage funding for the shock move.
In many cases, the property investors saw their monthly repayments double. Customers argued the society’s rate rise was illegal as the Bank of England base rate had not moved.
They are usually charged base rate - 0.5 per cent since March 2009 - plus a small margin on top.
Nearly 400 landlords banded together and took the lender to court to argue it had acted against the law. But the judge found against them.
The group now plan to take their case to the Court of Appeal.