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10:59 AM, 29th January 2015, About 9 years ago 390
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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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Mark Alexander - Founder of Property118
10:58 AM, 30th January 2015, About 9 years ago
Reply to the comment left by "Richard Adams" at "30/01/2015 - 10:24":
Clearly he did get it wrong, the reasons for which we can only speculate on.
Where a contract is so ambiguous that thousands of borrowers, solicitors and mortgage advisers have interpreted it differently to the contract writer the ambiguous terms should be ruled as being contra proferentem, i.e against the writer. Further contract law also needs to be considered in the construction of contracts such as ICS vs West Bromwich Building Society and RaintySky vs Kookman Bank. Both of these are Supreme Court rulings. The Judgement seems not to have considered any of these.
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Mark Lynham
11:03 AM, 30th January 2015, About 9 years ago
Reply to the comment left by "Mark Alexander" at "30/01/2015 - 10:58":
well something clearly went horribly wrong in this instance..
Mark Alexander - Founder of Property118
11:04 AM, 30th January 2015, About 9 years ago
Reply to the comment left by "Ken Rose" at "30/01/2015 - 10:42":
Hi Ken
The other sides argument is that a condition in their T&C's booklet allows them to vary rates in certain conditions. They are suggesting that their misfortunes have triggered their need to affect this condition in order to increase the margins at which our Tracker Rate mortgages track the base rate.
We all know that the condition they are relying upon does not relate to our contracts and only exists to allow them to vary their Standard Variable Rates. However, they have managed to convince Mr Justice Teare otherwise.
I really cannot spell it out more clearly than I have here and in the article leading this discussion.
Where a contract is so ambiguous that thousands of borrowers, solicitors and mortgage advisers have interpreted it differently to the contract writer, the ambiguous terms should be ruled as being contra proferentem, i.e against the writer. Further contract law also needs to be considered in the construction of contracts such as ICS vs West Bromwich Building Society and Rainy Sky vs Kookman Bank. Both of these are Supreme Court rulings. The Judgement appears not to have considered any of these.
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Mark Alexander - Founder of Property118
11:14 AM, 30th January 2015, About 9 years ago
Reply to the comment left by "Richard Adams" at "30/01/2015 - 10:56":
Hi Richard
Yes I'm sure that any Judges credibility would be compromised if his decisions are constantly overturned. However, that's not the case here, Mr Justice Teare has a very good track record. That doesn't mean he is infallable though, nobody is, and that's why the Court of Appeal process exists.
On the day, we did not give him a good enough reason to doubt his own Judgement. With the benefit of having had time to reflect on his decision we are now in a far stronger position to articulate our reasons for Appeal so that's what we must now do, i.e. apply to the Court of Appeal for leave to appeal. They will then make their decision independently of Mr Justice Teare with the benefit of our well considered arguments. If they grant leave to appeal it means they think we have at least a reasonable prospect of success. If they deny leave to appeal it means they don't think we have a realistic chance of success.
I don't think we can blame ourselves or our Counsel for not convincing Mr Justice Teare that we have a reasonable chance of success. Mark Smith had less than a day to prepare his arguments and for appeal and was not allowed to talk to any of us about the "heads up" that he had been given by the Judge.
I still have faith in the British Justice system at this stage, despite the setback yesterday.
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HOWARD MANSELL
11:45 AM, 30th January 2015, About 9 years ago
Reply to the comment left by "Mark Alexander" at "30/01/2015 - 11:14":
With no disrespect to Counsel Mr. Smith (who will have similar thoughts anyway) for any appeal it would seem sensible to instruct leading commercial counsel for advice and representation.
Dean
11:46 AM, 30th January 2015, About 9 years ago
Reply to the comment left by "Mark Alexander" at "30/01/2015 - 11:14":
Mark
Are you saying Mark Smith knew the day before we had lost ?
What are our chances of being able to appeal ?
The Seasoned Female Investor
11:46 AM, 30th January 2015, About 9 years ago
The following paragraph relates to a fictional book I read some years ago
Conversation in a private men’s club
‘Hello Minister, well hello your honour….how’s that case you have been working on?
Well bit tricky……goes the wrong way …….
Could damage the banks, the economy, MP safe seats, could even be bigger than the last financial crisis…….with massive claims….just like the PPI……and an election coming up in a few months !!!!
Well don’t really want to tell your honour…………… the outcome we expect in the house.
Good job this was all fictional……….can't remember the book....not that it would ever really happen in real life
Richard Adams
11:50 AM, 30th January 2015, About 9 years ago
Thanks Mark A for your communication re way forward. I agree leave to appeal should be sought on whatever grounds are the right ones which you outline plus anything else Mark S deems appropriate. If leave to appeal is denied then we must think again.
Since my mortgage broker has gone belly up and my solicitor was/is a chum that line is unappealing to me.
Declann emptor
11:54 AM, 30th January 2015, About 9 years ago
There are two words that many people interchange and use to mean the same thing. Law and Justice. There is of course another word that is getting more and more associated with one of these. Miscarriage. If you were to lay out our case in front of the population, 99.9% would agree with us since they can only see the plain English and it makes sense and can see the justice. Unfortunately, these documents are written by the other 0.1% where they can encrypt weasel words into them that only other people in the 0.1% can decrypt. In fact it is probably less than 0.1%, since there have been millions of mortgages and therefore conveyancing and this has not been picked up. So either all those lawyers are lazy and incompetent or they don’t even understand their own profession.
Caveat Emptor is a great phrase that they like to quote at us but it looks like it is meaningless unless you belong to the 0.1%. The law is supposed to make a level playing field for all but how can it be if only 0.1% understand the rules. Even our elected representatives have tried to make changes to make it more level. In our case, making the key facts document, in plain English so important but this again gets swept aside once the 0.1% get involved. That is why the jury system is so important to keep in check the 0.1%, who in most cases don’t live in the real world or even understand the word morality. The 12 good men or women may not understand the law but understand justice.
In our case we have had one word applied too us but denied the other.
Mark Alexander - Founder of Property118
12:10 PM, 30th January 2015, About 9 years ago
Reply to the comment left by "Dean " at "30/01/2015 - 11:46":
Apparently so, the Judge sent details of his Judgement to both sides the day before.
I only realised this when the first sentence of of the Judges mouth was to effectively remind the barristers that his decision was communicated the day before and the objective of the day was to discuss cost awards.
Having never been a party to a Commercial Court case before I was unaware that such procedures are perfectly normal amongst the legal fraternity. I'm glad in a way that I didn't know, otherwise I'd have been begging Mark S to tell me the verdict and if I'd have managed to prise it out of him (highly unlikely of course) I'm not sure that I would have wanted to go to the hearing.
However, I am very glad that I wasn't told and that I did go. I learned a lot and had some very useful discussions with other group members who turned up too.
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