Legal action against brokers and others could follow a judge’s decision to back a lender in varying its interest rate on a tracker mortgage, Mark Alexander has warned.
Mr Alexander, founder of buy-to-let investor forum Property118, said he was aware that some investors may turn against their brokers and seek redress, after a group action against the West Bromwich Mortgage Company, a wholly-owned subsidiary of the West Bromwich Building Society, failed earlier this year.
He said: “I was informed by the complainants that instructions have been given to counsel to prepare and send the letters before action. All three cases relate to the West Bromwich Mortgage Company tracker rate hike and associated mortgage advice given at the time.
“I have since heard that similar test cases are to be issued against solicitors and conveyancers.”
Following West Bromwich Mortgage Company’s victory in the high court of justice in January 2015, when Mr Justice Teare did not consider that there was a contradiction between a box in a mortgage offer letter and a clause in an accompanying document, Mr Alexander warned that the lender had only raised the margins on tracker rate mortgages sold by brokers.
Mr Alexander added: “Is that not a clear message that the building society wants these borrowers to sue their brokers?”
A West Brom Building Society spokesman described the claim that the society wanted the borrowers concerned to sue their brokers as “completely unfounded”.
Mr Alexander asked for brokers to donate money to help him appeal the case.
Donna Hopton, founder of mortgage broker network Cherry, said: “Whether we like it or not, and however unjust we know this to be, the fact is that if this case is not overturned, brokers will be sued and we will have another nightmare CMC fest.”
Mark Alexander led a group of investors in disputing the extent of a lender’s contractual right to vary the interest rate payable by the borrower and to terminate the mortgage on notice.
The case noted that a letter dated 6 June 2008, 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 he would pay the Bank of England base rate in addition to a 1.99 per cent premium until the term end.
A section of the letter said BoE rate changes would apply to Mr Alexander’s mortgage but a clause in an accompanying document said interest could vary according to changes in the law or market conditions.
In September 2013 Mr Alexander contested the lender’s right to increase the margin over base rate applicable to the mortgage by 2 per cent in light of market conditions, but Mr Justice Teare concluded that the box and clause were not inconsistent.