The Daily Telegraph has reported that some borrowers who took their cases against West Brom to the Ombudsman have started to receive decision letters – and it’s not good news.
The Ombudsman has ruled that the lender didn’t act unfairly by upping rates on buy-to-let tracker mortgages despite no change in the base rate.
But Mark Smith, a barrister at Cotswold Barristers who is representing borrowers taking part in the class action, is pressing ahead with the case.
“The claimant is not surprised by the decision of the Financial Services Ombudsman, which had been widely trailed in our previous dealings with them. It does not affect our position in the commercial court case, as the court will be considering different arguments than those which were addressed by the Ombudsman,” he said.
In September 2013 West Brom announced it was increasing rates on 6,700 buy-to-let tracker mortgages despite no rise in the Bank of England base rate since it fell to an all-time low of 0.5% in March 2009.
The move targeted “professional landlords” with three or more rental properties and at least one mortgage with a division of West Brom called the West Bromwich Mortgage Company.
The rate hike meant some landlords saw the interest rate on their mortgage double and monthly payments increase by hundreds of pounds.
Many customers took their case to the Ombudsman but, according to The Telegraph, it’s told them the lender had “legitimate commercial reasons” to vary its tracker rate.
The statement echoes the small print West Brom is relying upon to justify its actions. Despite borrowers being sold tracker mortgages on the understanding they “tracked” the base rate – and the rate would only rise when the base rate did – a clause in the small print said the lender was allowed to change the rate without the base rate moving.
The clause said the rate could be changed to “reflect market conditions and to make sure its business is carried out prudently, effectively and competitively”.
Landlords are an easy target for lenders looking to increase tracker rates as they are not protected by the same regulations as owner-occupiers.
The Telegraph story quoted details of one letter from the Ombudsman the newspaper had seen.
“I am satisfied that the terms and conditions of the mortgage you have, allow West Bromwich to increase the interest rate in the way it has,” it said.
“West Bromwich has satisfied us that there is a legitimate commercial reason for it doing so. It has not acted unfairly in changing the interest rate or in the way it has done so.”
The class action, led by landlord website Property118.com and for which Smith is counsel for the claimant, is due to be heard in court on 21 January 2015.
