26 Jul Buy to let investors overpaying on their mortgages
Think you have a fixed ‘buy to let’ mortgage rate? Think again. 6000 West Bromwich Building Society customers thought that they were locked into rates that tracked the base rate. They were not. Unbeknown to the customers, the West Bromwich had increased the rate in December 2013 without notification.
Customers believed that they were obtaining the peace of mind and security of entering into a tracker mortgage but in the small print the West Bromwich indicated that they could change the rate to reflect market conditions.
The West Bromwich advised their customers that they would have to accept the new rate and if they did not they would have to pay the loan off within a month. We understand that the reason the West Bromwich focused on their ‘buy to let’ borrowers, rather than domestic borrowers, was that ‘buy to let’ landlords could be seen as non-consumers. Non-consumers are assumed to be more business savvy and to have read all the small print and so it is less easy for them to claim that the lender’s terms and conditions are not binding.
The Court of Appeal, however, recently ruled that the West Bromwich was not entitled to vary the customers’ mortgage interest rates when there was no change in the Bank of England basic rate. In this case the customers believed that they were entitled to a tracker mortgage as this is what the mortgage offer indicated; however, the small print (terms and conditions) indicated that the West Bromwich could change the rate to reflect market conditions.
Several other Banks and Building Societies have also changed rates in this manner. For example, the Skipton Building Society, Manchester Building Society and the Bank of Ireland have unilaterally changed their customers’ rates of interest.
Other lenders may well claim the facts in their cases are different and their own terms and conditions allow them to remove the security that the customers thought they had from a tracker mortgage. It remains to be seen whether they are correct.
Should you have a mortgage with one of these lenders, and you would like us to review your terms and conditions to ensure that your interest rates cannot be changed unexpectedly, please do contact us.
If these lenders succeed where the West Bromwich did not then it is possible that there will be claims against financial advisers and the solicitors who acted in the transaction. For example, it is possible that your solicitor should have spotted the small print relating to the lender’s ability to change the rate and brought it to your attention. There will be time limits to all these claims and should you wish us to we would be happy to advise and give a free consultation on this particular point.