The founder of action group Property 118, which is representing borrowers with 420 affected mortgage accounts between them, has claimed a court settlement would spell a worst-case scenario for West Bromwich, which would be “losing no more than 10 per cent of their reported £19m of additional annual profits from this rate hike”.
He added: “This refusal now plays nicely into our hands for litigation purposes as it will be frowned upon by the courts, especially if we lose our case and end up having to pay costs associated with a David and Goliath battle.”
In September 2013 West Bromwich confirmed that 6,700 buy-to-let tracker borrowers would see a rate rise of 1.9 per cent from December, more than doubling some customers’ monthly repayments.
But a core group of affected borrowers challenged the lender’s move, even garnering support from Conservative MP David Morris who called on the FCA to investigate the rate hike in January.
The FCA has also written to chief executives of lender organisations reminding them of expectations around changing rates and has confirmed it will publish results of a consultation later this year.
West Bromwich has repeatedly defended its decision saying the move only affects commercial buy-to-let borrowers with three properties or more, none of which are their primary residence. The mutual has also said that its terms and conditions allow for the rate hike.
Litigation will start during the week of 31 March 2014 with the service of court papers.
Right to reply
A spokesperson for West Bromwich Building Society said: “In respect of the suggestion of arbitration, which the former legal representative of the action group did suggest on the basis of cost and for ‘tactical legal reasons’, we have merely pointed out that in the society’s view the Financial Ombudsman Service already fulfils this role and is free to complainants.
“Indeed members of the action group have already elected to use this service, all the costs of which are picked up by the society. The society is committed to accepting the decision of the Ombudsman and would expect to apply that decision to all customers affected by the same circumstance.”