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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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How to sell Freehold for late brothers estate?
11:34 AM, 1st February 2015, About 9 years ago
Reply to the comment left by "Mark Alexander" at "01/02/2015 - 11:02":
http://www.property118.com/member/?id=5859
David Lawrenson
14:31 PM, 1st February 2015, About 9 years ago
Take average tracker margin, numbers of tracker mortgages out there (res and BTL), average loan value outstanding, average SVR hike likely and then calculate what the cost would be to all borrowers if all lenders follow West Bromwich.
Not sure if data available, and I am sure the CML won't have it (based on my past contacts with them, but it could be guesstimated).
Then use the number to get rest of press interested because sadly in the main press it is only the Telegraph and more recently the Mail that "get it" right now. (Did I miss it but have The Times / Sunday Times completely ignored this since the judgment).
I will be sending my own press release out attacking the judgement, but this data would help. But not being a mortgage broker though I could not hazard a guess on some of the input data.
Whilst writing and whatever you decide to do now re appeal or not, well done Mark. Thus far, no one could have done more
David Lawrenson LettingFocus
Alison Buckland
14:45 PM, 1st February 2015, About 9 years ago
Reply to the comment left by "Mark Alexander" at "01/02/2015 - 10:40":
Many thanks for the explanation re Appeals. I can now see all the more why 21 days is no time at all to make a case!!!! Thank you for all the work (and worrying) you and Mark S have and continue to put into this on our behalf.
Sarah Pajger
16:20 PM, 1st February 2015, About 9 years ago
Has the judge any idea of the massive knock on effect of his decision?? Only yesterday there was protests in London against lack of affordable housing and cries for rent control. How is the PRS suppose to cap rent increases when the banks are allowed to increase their trackers? If all lenders follow suit then this could lead to mass exodus by Landlords out of the PRS with no social housing as a back up. What protection is there for Landlords now, whats to stop a tracker increase to 10% plus BoE base rate? A mortgage contract should do what it says on the tin! Well done Mark on everything you've achieved to date and I hope the appeal is successful - for all of our sakes.
Shining Wit
18:22 PM, 1st February 2015, About 9 years ago
I'm gobsmacked by the judgement...
I've taken another look at my offer - and it clearly states it is a BTL Tracker which (after the discount period) reverts to a variable rate which BBR + .99%.
Clearly it is a variable interest rate (so there wasn't going to be any benefit from attempting to argue otherwise).
Equally clearly WB have the right (indeed have the obligation) to change the rate they charge if the BBR changes - again there wasn't any point fighting that.
The battle therefore needed to focus on whether WB has the right to change the rate at any other value other that the value specified by the 'contractual' formula (in my case BBR + .99%)
Sunrise and Sunset are variables to - there is a fixed formula for calculating them - so, although variable, the times can't be changed from those given by the formula....
(You could say that the times TRACK the earth's orbit)
My understanding of the judgement is that WB (now?) have the right to change the interest rate and/or call in the mortgages at 30 days notice (whether you are, or have ever been, in default or not).
Furthermore (if I understand the legal stuff), this actually applies to any WB mortgage - even though (so far), they have only enforced their 'right' the change the interest rate on a subset of 'clients' who happen to have 3 or more BTL (regardless of the lender(s) is/are).
That's a pretty scary position if you have any non-fixed mortgage with WB (or any other lender that jumps on the bandwagon)...
Actually it, if I understood the WB legal defence documents, they admit that they won't treat any (group of) mortgage holders worse than any other - which means that they will HAVE to 'roll out' their new policy to ALL their borrowers - now that they have proved their 'right' to hike the rates (if prudent and efficient).
At the moment, I only have one affected mortgage, and it's costing me £200 pcm more than it should (according to the paperwork that I read and understood and signed).
We must take this to appeal.
A tracker is a variable rate mortgage that changes according to a formula - it should move (or stay constant) according to the Base Rate it is tracking, offset by the agreed premium. Simples.
A Standard Variable Rate is a variable rate loan that changes according to the whim of the lender - and if you don't like the rate charged, you have to redeem the loan.
There is (or should be) a world of difference between the TRACKER I was offered (and paid for) and the SVR which WB seem to think we signed up to....
If we need to raise more funds, then put my name down: While I don't WANT to fund lawyers and the legal system, I CAN NOT afford to bail out the bankers...
Thank-you so much to everyone who is helping to fight this TOGETHER. The two Marks are doing an excellent job
THANK-YOU SO MUCH
SW
Mark Alexander - Founder of Property118
19:47 PM, 1st February 2015, About 9 years ago
Reply to the comment left by "David Lawrenson" at "01/02/2015 - 14:31":
Hi David
There are estimated to be around 1 million lifetime tracker mortgage contract with an average outstanding balance of circa £100,000 per contract.
So that's one hundred thousand million at a margin of let's say 1.5% per annum ....
The figure you get is ..... ????
To big for my calculator LOL
.
All BankersAreBarstewards Smith
19:55 PM, 1st February 2015, About 9 years ago
with those numbers at stake - no wonder the "old boy network" has already kicked in
Nick Peers
20:18 PM, 1st February 2015, About 9 years ago
I thought I would take a quick look at the 'which.co.uk' website, with a view to refreshing my understanding of the definition of a Tracker Mortgage.
I appreciate that the 'Which' web site definition of 'Tracker Mortgage' isn't specifically associated with Buy to Let mortgages, but their overall definition of the term 'Tracker Mortgage' is exactly the same as we understood it to be when we took out our Tracker Mortgage with West Bromwich many years ago, and is still the same as we understand it to be (or understood it to be) today.
BBR goes up, and we follow, at whatever pre agreed percentage amount above BBR, as contractually agreed with the Mortgage Co. BBR goes down, and we follow in the same fashion. We are, or thought we were, inextricably linked. We took our chances with the BBR, or thought we did - regardless of economic circumstance.
I therefore continue to be confused, along with everyone else, as to how the financial, and judicial establishments can interpret the word 'tracker' so differently.
If 350+ people (I imagine absolute bare minimum) of reasonable intelligence (!) have failed to understand the small print, I think it is quite reasonable to assume that something was/is not quite right with the original terms....(?)
I guess I must have inadvertently bought some sort of hybrid mortgage - a variable 'tracker'....?
I think it also worth noting that 'economic woes' would provide little or no defence for any of us failing to keep up with mortgage repayments, but it seems that West Bromwich can, with little or no warning, use their own economic 'woes', in conjunction with their interpretation (convenient re-interpretation?) of their small print, to enable them to change the rules of the game - rules that seemingly only the judiciary, and the top financial establishments are currently able to understand....
I do hope you get a chance to state your case again Mark.
All the best with the next few days, and many thanks for all your efforts.
Mark Alexander - Founder of Property118
20:31 PM, 1st February 2015, About 9 years ago
No more conspiracy theories please, it's doing my head in and getting us nowhere. More to the point, dealing with such comments are a distraction.
PLEASE, PLEASE, PLEASE - lets have no more comments about the Judge being drunk, high on drugs, bribed, extorted, nobbled by politicians etc. All such comments will be deleted by moderators.
Mr Justice Teare is a highly respected Judge but he is human and like all humans he is capable of making mistakes, and it seems in our case he made an error of judgement which we need to focus on getting overturned. Paid up and represented members of our Action Group can read our strategies for this on the secure forum. .
.
Richard Kent
20:41 PM, 1st February 2015, About 9 years ago
Mark,
Although some of you have found some of my comments harsh and slightly blunt and maybe offensive I strongly believed you would win this case and I hope you win the appeal if there is one.
Let’s suppose for a moment though that you had won this case in the first hearing and the lender then called in the mortgages. I have read elsewhere that the lender asked this specific question of the Court and the Court confirmed the lender was entitled to do this if they had lost the case.
Bearing this in mind, and not losing sight of the philanthropic sentiment to this case, this being the wider positive impact on the industry. Based on the above scenario would you put your answers to the following questions………….
Q1 Knowing before the legal action that the lender was likely to call in the mortgages in the event of a loss (their loss) why did you still go ahead with the legal action?
Q1a Were so many of the borrowers in a position where they could not remortgage before the legal action was mounted?
Q1b I appreciate the impact that a win would have had on the mortgage industry generally but this would/might not have benefitted the borrowers of this legal action in the long term in the event of the lender calling in the mortgages immediately after the win. Please could you comment?
Q2. Now that you have the judgement do you think that it is likely the lender will consider hiking the rate further as an excuse to hit back at the borrowers and under the guise that they did it to cover some of the costs of fighting the legal action or some other spurious reason?