10:59 AM, 29th January 2015, About 8 years ago 390
Today was Judgement Day in the case of Mark Robert Alexander (me) vs the West Bromwich Mortgage Company. I was representing a group of 360 affected borrowers, who between them contributed nearly £500,000 to fund the legal action. I am extremely disappointed to report that we didn’t get the News we were so desperately hoping to receive.
#WestBromTracker – please re-Tweet if you think we should appeal – http://t.co/UgNLSXvurt
— Mark Alexander (@iAmALandlord) January 30, 2015
Could this be the end of tracker mortgages as we know them for up to 1 million people in the UK?
The Judge, Mr Justice Teare ruled that the mortgage company were within their rights to increase the premium (margin) on the rate they charge above the Bank of England base rate. He also ruled that West Bromwich Mortgage Company had the right to call in mortgages with 30 days notice. Clearly we are shocked at his decision and we anticipate outrage from the general public too.
The special conditions in my OFFER OF LOAN state (I’ve added bold capitalisation for emphasis) ….
“After 30th June 2010 your loan reverts to a variable rate which is the same as the Bank of England Base Rate with a premium of 1.99% UNTIL THE TERM END.”
NOTE the words “until the term end”, which I have always understood to mean that the premium of 1.99% over the Bank of England Base Rate would apply to the remainder of my 25 year mortgage after the initial 4 year fixed rate period was completed. The Bank of England Base rate today is 0.5% so you would be forgiven for thinking that I should be paying a rate of 2.49%. However, the West Bromwich Mortgage Company have added another 1.5%, meaning that I’m now paying them 3.99%. When they first increased the rate, the margin they added on was 1.99%. Should I be thankful they reduced it? What’s to stop them putting it up to 10% tomorrow? Well according to the Judge, Mr Justice Teare, apparently very little!
The Special Conditions, which the mortgage company are relying upon to vary the premium (margin), are generic to all of their mortgage products and come in the form of a booklet. It is very obvious that the Special Conditions booklet is generic to their entire mortgage range because in one section it says the property cannot be let, which is clearly inconsistent with a Buy To Let Mortgage.
To deal with issues of inconsistency between the OFFER OF LOAN and the Special Conditions booklet the mortgage company also has the following condition in the very same Standard Conditions booklet it has been allowed to justify the increase in the premium charged ….
“These Mortgage Conditions incorporate any terms contained in the OFFER OF LOAN. If there are any INCONSISTENCIES between the terms in the Mortgage Conditions and those contained in the OFFER OF LOAN then THE TERMS CONTAINED IN THE OFFER OF LOAN WILL PREVAIL.”
I accept that the mortgage company needs the contractual ability to vary their Standard Variable Mortgage rates in their generic Special Conditions booklet and I had every reason to believe that the clause they are now relying upon to increase my interest rate only exists because Standard Variable Rate mortgages are not pegged to another rate in the same way as a tracker. I had no reason to assume that the clause allowing them to make variations to interest rates would affect me, after all I had a Tracker Rate Mortgage with a premium over the Bank of England base rate UNTIL THE TERM END, which in my case is in the year 2031.
Would you have come to the same conclusions I did?
The reason I took the lead and encouraged other affected borrowers to fund this expensive legal battle was that the industry regulators have a proven track record of allowing banks and building societies to get away with this particular form of “daylight robbery”. In 2013 the Bank of Ireland hiked its rates for over 14,000 customers with Tracker Mortgages, many of them were home-owners, NOT Landlords. The regulators proved ineffective for affected complainants. Prior to that, in 2009, the Skipton Building Society CEO publicly confirmed that their Standard Variable Rate mortgages were capped at 3% over the Bank of England base rate and that pledge would be honoured despite market conditions. A year later that promise was broken and the regulators did nothing about that either!
The problem that all borrowers have faced when complaining to regulators has been that all mortgage lenders who have been a party to these rate hikes to date have very sneakily targeted borrowers who ‘fall between the cracks’ in terms of consumer protection regulation. WBMC targeted borrowers who own three or more properties whereas the Bank of Ireland relied on a date when mortgage selling regulations changed. The the Bank of Ireland case this provided them with an opportunity to mercilessly target homeowner mortgages too. Anybody who took out a Tracker Mortgage before the MCOB (Mortgage Conduct of Business) rules were introduced on 31st October 2004, AND anybody who owns three or more properties has good cause to be VERY worried following the judgement passed today.
There are an estimated 1 million Tracker Rate mortgages in the UK, they were very popular in the decade prior to the Credit Crunch. I have other tracker mortgages with other Buy to Let lenders and I am fearful that if they follow suit all my hard work to generate money to invest for my retirement will be undone. Many homeowners with tracker rate mortgages could also lose their homes.
I simply couldn’t allow this to continue unchallenged. Somebody had to stand up to the financial bullies and I am proud to have been one of them, despite this awful news.
The question now is; “Should we appeal?”
We already have £68,912.39 lodged with Barco (The Bar Council Escrow Account Service) and we have paid £350,000 into the Court on account of the other sides claimed legal expenses. The Judge is yet to rule on costs to date so we may get some of the money paid into Court back too. We don’t yet know how much an appeal will cost in terms of paying the others sides legal fees if we lose, however, our barrister is so dissapointed by the verdict that he has already offered to represent us in the Court of Appeal on a no-win-no-fee basis, despite this not being covered in his original terms of engagement.
I also worry about the potential impact on tenants. The ramifications of lenders being able to hike up Tracker Mortgage interest rates or call in unprofitable loans on a whim (even if they are not in default) could no doubt result in mass defaults of repayments and inevitable repossessions of the quality rental property which has been funded by Buy To Let mortgage lenders. The knock on effects to tenants in terms of security of tenure and the availability of quality accommodation, afforded by the very existence of Tracker Rate buy to let mortgages, could be devastating!
Please share your thoughts in the comments section towards the bottom of this page.
Mr Justice Teare’s 20 page reasoning for his ruling is available free of charge via the Courts. However, I am asking everybody reading this article to donate £50 by completing the form below and in return we will immediately redirect you to a full copy of the Judges ruling. All money received will be used in a marketing campaign to raise awareness of the potential consequences of this dreadful decision. If you want to donate more than £50, simply order two copies for £100 or three for £150 etc. We believe we have already raised enough money to fight an appeal. However, we must not dip into these funds to promote the importance of the case, hence the need for an additional fundraising campaign.
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11:37 AM, 29th January 2015, About 8 years ago
RIP Faith in Justice System
11:38 AM, 29th January 2015, About 8 years ago
Mark, thanks for your clear and informative post. I am sure all involved share your disappointment, myself included.
I do fear the worst relating to tracker deals, with the precedent being set there is nothing to stop other lenders following suit, certainly a monumental case.
It will ultimately affect tenants as landlords will try and maintain margins, the next unanswered question is will West Brom call in the loans of us involved.. If this is the case, I will be handing the keys back and a good, reliable tenant loses their home..
Thanks for your efforts
11:43 AM, 29th January 2015, About 8 years ago
I don't know the details of this - but from what I know I am extremely surprised by the judgement. Contractual ambiguity should of course always be construed against the author of the contract and in any case I agree that what you have transcribed doesn't really seem that ambiguous.
Did you also run arguments on the misleading and deceptive sales and marketing material I assume? Even if the contract was found to allow the rates rise, they could be estopped or liable for damages given that the marketing material (which could be reasonably relied on) represented that the rate would be pegged to the base rate.
I'd certainly be getting counsel's advice on whether an appeal would be a goer.
11:44 AM, 29th January 2015, About 8 years ago
The group is considering an appeal against the Court's refusal to hold the WBMC to the contract which the group members believe they had made. The borrowers that I represent believed that they were protected from the risk of the financial needs of the lender resulting in an increase of the rates they paid by virtue of their contracts being 'tracker' mortgages (so named by Mr Westhoff, the CEO of WBMC, to the Court).
It is highly likely that the decision will have widespread effects on other finance contracts, where lenders will now be scrutinising their terms to see if they have a way of escaping from the need to track an external reference rate of interest by utilising a standard term power to take control of the rate they charge irrespective of movements in the base rate or LIBOR.
There are at least 1 million residential tracker mortgages in the UK, and many other types of tracker finance product. There will be a significant number of negligence claims against brokers and solicitors for failing to advise that the true meaning of the contract the borrower signed was that the lender's obligation to track the reference rate could be dispensed with; that in effect there is no meaningful distinction between tracker and standard variable rates so far as the power of the lender is concerned.
There may also be mis-selling claims arising from the publicity that WBBS and its group promoted, which stated that tracker mortgages gave the 'certainty' of knowing that the rate would move in line with the base rate, when this was not the case.
11:48 AM, 29th January 2015, About 8 years ago
Never posted before but what's the bet mx are watching this could be Armageddon if they do similar
11:54 AM, 29th January 2015, About 8 years ago
This judgement beggars belief, and it goes against all common sense. It seems that mortgage agreements aren't worth the paper they are written on allowing Lenders to disregard overriding clauses, and do whatever they like.
I look forward to reading the full judgement as to how such a conclusion could be arrived at.
I have 4 trackers with Bank of Ireland and I am fearful that they will see this decision as a green light to up the premium on all these mortgages. The ramifications enormous with potential hundreds of thousands of mortgagees potentially being affected.
This has to be appealed.
Surely the media will be interested ion this absurd outcome, and may be willing to sponsor the appeal.
Would there be any comeback on the conveyancing solicitors who vetted the mortgage agreements, allowing such clauses to go through unchallenged?
11:56 AM, 29th January 2015, About 8 years ago
Disappointed! As a Financial Adviser I have always been told that the wording on the Keyfacts Illustration was to be relied on. This is obviously not the case anymore.
Do all Tracker mortgages need to come with a warning now? ' Your Tracker Mortgage could be at Risk and can be amended at any time by the Lender if they feel that they are not making enough money'
11:56 AM, 29th January 2015, About 8 years ago
....... aren't worth the paper ...................
11:56 AM, 29th January 2015, About 8 years ago
stunned, although ultimately not surprised... i didnt pick up anything positive from the hearing last week... if a simple matter is made this complicated then i knew we were in for problems.... god knows what will happen now but that Judge should be ashamed of himself.
11:58 AM, 29th January 2015, About 8 years ago
So have I got this correct, this nightmare ruling only applies to mortgages taken out Before 31/10/04 ?