A judge’s decision to back a lender in varying its interest rate on a buy-to-let mortgage has killed the tracker mortgage, a lawyer has claimed.
Mark Smith, a barrister who represented a group of investors led by Mark Alexander of landlord portal Property118, said West Bromwich Mortgage Company’s victory in court could end the tracker mortgage.
He said: “The point of having a tracker is to protect you from the financial vagaries of the individual lender and tie you to the market rate. The tracker rate in any case is going to be a thing of the past.”
The case centred on an offer letter from West Bromwich Mortgages, a wholly-owned subsidiary of West Bromwich Building Society, to Mr Alexander, dated 6 June 2008.
The letter, which concerned a loan offer of £90, 299 for 25 years, said Mr Alexander would pay a rate of 6.29 per cent until 30 June 2010, when it would pay the Bank of England base rate in addition to a 1.99 per cent premium.
One boxed-out section in the letter stated that BoE rate changes would apply to Mr Alexander’s mortgage, while a clause in the letter stated that interest could be changed under conditions including changes in the law or to reflect market conditions generally.
Mr Alexander contested the lender’s right to decide to increase the margin over base rate applicable to the mortgage by 2 per cent in light of market conditions in September 2013. But the judge, Mr Justice Teare, concluded that the box and clause were not in conflict.
Mr Alexander is seeking £50 donations from brokers to fund an appeal of the case.
Donna Hopton, director of Kent-based mortgage broker network Cherry, said the industry appeared undecided on how to act. She added: “Brokers are mistreated when all they have done is behaved rationally, and treated their clients with respect.”
Right to reply
A West Bromwich Building Society spokesman said: “We have always maintained that we acted entirely within the terms and conditions of these buy-to-let mortgages and the court’s ruling wholly justifies our position.”