Kate Faulkner discusses topical BTL issues with Brooklands Commercial Finance9:15 AM, 20th July 2019
About 19 hours ago 0
Offer letter – The wording in the offer of advance from WBBS under the heading “Rate Payable”, states (emphasis added)
“After [30 June 2010] your loan reverts to a variable rate which is the same as the Bank of England Base Rate, currently 5%, with a premium of 1.99% until the term end, giving a current rate payable of 6.99%. Any applicable change in the Bank of England Base Rate will be applied to your account on the first day of the month following the change, unless the change is made after the 13th of the month, in which case it will be applied on the 1st day of the second month following the change”.
West Brom specifically states that the variable rate is the same as the Bank of England Base Rate. There is no mention in the offer of loan, either in full or by reference to the relevant mortgage conditions, of any entitlement by WBBS to alter the rate of the differential or of the variable rate to change as a result of anything other than a change in the base rate.
“Information you need to know about your Mortgage” which contains the Mortgage Conditions 2006. This states (emphasis added):
“You will be required to pay interest on the amount of the Loan each month. The amount of these monthly payments is detailed in your Offer of Loan letter.
The rate of interest charged may be varied by us by us from time to time, except during periods where the Loan is expressed to be at a fixed rate of interest. We will notify you of any variation in the interest rate”.
Mortgage Conditions 2006; upon which WBBS seek to rely in imposing the proposed increase. 5.1 states
“Interest is payable by you … at the rate or rates specified in your Offer of Loan Letter which, except during any period in which interest is expressed to be at a fixed rate, may be varied by the Company at any time for any of the following reasons:…. (reasons provided include “to reflect market conditions generally” and “to make sure our business is carried out prudently, effectively and competitively”.
These are the reasons relied upon by WBBS in their letters to affected borrowers in September 2013.
Whilst the Mortgage Conditions do provide other reasons for varying the rate of interest (not the differential) none of these reasons, save for a change in the base rate, are referred to in the Offer of Loan.
Also in the WBBS Mortgage Conditions booklet, paragraph at the end of clause 1 of the Mortgage Conditions 2006, states that where there is inconsistency between the terms contained in the Offer of Loan and the Mortgage Conditions, the terms contained in the Offer of Loan will prevail.
Many of the affected borrowers read clause 5 and genuinely believed that this section was not applicable to their loan. Instead they interpreted the clause in the booklet as only relevant to the mortgages written on WBBS standard variable rates, and not those which tracked the Bank of England base rate. This is supported by WBBS’s marketing materials, the statement which until recently was on its website:
“Tracker mortgages give you the certainly of knowing that the rate you pay will move in line with Bank Base Rates”
and the fact that there is no mention in the Offer of Loan of WBBS ability to increase the interest rate for any reason other than an increase in the base rate.
Very simply, the legal principles of contra proferentem law are created to enable judges to decide which conditions apply if contractual conditions are in conflict. In other words, if the contract has two or more similar conditions and they don’t say the same thing one of the conditions will apply and the others will not.
The relevance of this is that West Bromwich Mortgage Company have conditions in their mortgage documentation which contradict each other.
The law goes on to say that the judges interpretation of what the contract means will be the condition(s) which are in favour of the person to whom the contract was presented. To put it another way, the judge will rule that the most favourable condition will apply to you, the borrower, because you didn’t write the contract, your mortgage lender did.
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