A homeowner with a West Bromwich Building Society lifetime tracker has been left with “sleepless nights” over her future pension income after seeing rates rise 2 per cent without warning.
The mortgage borrower, known to Financial Adviser, said she had been “sick with worry” not just over the 2 per cent hike - but also over the wording of the letter announcing the change, as WestBrom cited the right to “recall the loan with 28 days’ notice”.
She said the rate hike had come as a surprise, as the possibility of West Bromwich Building Society changing the rate had only been mentioned in a 2006 mortgage conditions document, which raises various scenarios for changing the rate but refers the borrowers to the terms set out in their loan offer.
However, according to lawyer Justin Selig, who has been instructed by campaign group Property118 to contest the 2 per cent hike on the lifetime mortgage products, the borrowers had reasonable expectation to believe that “this section was not applicable to their loan”.
He said: “While the mortgage conditions do provide other reasons for varying the rate of interest (not the differential) none of these reasons, save for a change in the base rate, are referred to in the offer of loan.
“Also, paragraph one at the end of clause one of the mortgage conditions 2006 booklet states that where there is inconsistency between the terms contained in the offer of loan and the mortgage conditions, the terms contained in the offer of loan will prevail.”
Further, Property118 is querying why small landlords with only a handful of properties are being targeted, not all borrowers.
When asked why this was, a spokesman for West Bromwich Building Society said the rate change affects commercial landlords, those “with multiple buy-to-let properties (three or more), and that the main residence is not a consideration”.
However, the couple who spoke to Financial Adviser only have four properties between them, one of which is their main residence. Only two properties are with West Bromwich Building Society lifetime mortgages.
None of the properties has ever been in arrears.
Her husband’s two properties were bought not because he wanted to be a landlord but because he cashed in his poorly performing pension early to buy the properties as his main source of income in retirement.
She added: “In fact, my daughter lives in one of the houses.”
A spokesman for West Bromwich Building Society said: “The changes apply where someone has three or more B2L mortgages in their name, and they do not all have to be with West Brom.”
The couple contest not just the hike, which according to Property118 affects 41 per cent of WestBrom’s lifetime tracker mortgage holders, but also the nature of what ‘commercial landlord’ means and whether they could see the loans recalled at just a month’s notice.
Mark Alexander, former broker and founder of Property118, said advisers had not been made aware in the marketing literature or loan offer that the society had reserved the right to change the terms of the lifetime mortgage tracker rate.
He said: “It is in the interests of every mortgage adviser and solicitor involved in these transactions to help the case against West Brom because if that case is lost there can be little doubt that professional advisers were negligent.”
When asked if West Bromwich Building Society had written to brokers, the spokesman said: “No, but we are in regular dialogue with our broker colleagues and willing to respond to any queries relating to this matter.”
Adviser views:
Donna Hopton, founder of mortgage adviser community Cherry, said: “Brokers are shocked, appalled and very angry. We very much look forward to receiving West Brom’s explanation which can’t come soon enough”
Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, said he has been having more conversations with mortgage advisers concerned about their clients caught up in this and are asking how they can help.
