Landlords angry about the controversial move by West Bromwich building society to increase tracker rates on its buy-to-let mortgages have grouped together to plan a class action against the lender.
The lender announced last month that it was hiking rates on its lifetime tracker mortgages, despite no change in the Bank of England base rate. Around 6,700 landlords with the society face a two percentage point rise on 1 December.
West Brom is using contract small print to up the rate paid by landlords. In particular, it has referred to a contract clause stating the rate may be varied to “reflect market conditions” and ensure the business is carried out “prudently, efficiently and competitively”.
West Brom's decision to raise BTL rates could double the rates on some of its loans and follows a similar decision by the Bank of Ireland four months ago, which hit 13,500 landlords and also sparked a legal battle.
Mark Alexander of the Property118 landlords’ forum is co-ordinating a legal campaign against the West Brom rate hike.
He said: “Whether you are a client of West Brom, Bank of Ireland (which has also done the same) or indeed you have a tracker mortgage elsewhere you need to help fight this case. Your tracker mortgages may not be with West Brom or Bank of Ireland, however, that does not mean that you are safe. You may be OK today but what about next week, next month or next year?”
The Property118 forum is raising a fighting fund to take a class action lawsuit to the courts with around 700 landlords involved so far. A template complaint letter to the building society and financial ombudsman is also available on the website.
Solicitor Justin Selig of The Law Department said: “I have had a look at the paperwork and there doesn’t seem to be any reference to the ability to increase the margin, so I don’t know how they think they can get away with it. This is definitely worth fighting.”
Meanwhile the Financial Conduct Authority (FCA) has said it will check whether the rate hike breaks mortgage rules.
Speaking at the Financial Services Expo (FSE), Linda Woodall, FCA director of mortgages and consumer lending, acknowledged the issue of potential consumer detriment if lenders choose to change mortgage product terms and conditions.
She added that although the change in rate by West Bromwich BS was in the buy-to-let market – which is not regulated by the FCA – there was still good reason for it to examine such action on a case-by-case basis.