Mark Alexander, who runs Property 118 Action Group, is representing 350 buy-to-let (BTL) landlords who have accused the building society of illegally increasing the interest rate on their mortgages by nearly 2 per cent in December 2013.
The landlords claim the tracker mortgages were sold on the basis that the interest rate would be fixed to the Bank of England’s (BoE) base rate, which has remained at 0.5 per cent since March 2009.
But the building society said clauses in their standard terms and conditions allowed it the discretion to change the rate to reflect market conditions, even when the BoE’s base rate remained fixed.
Mr Justice Teare sided with the lender in a ruling at the Commercial Court in January 2015, but Mr Alexander won the right to appeal and has raised more than £500,000 for representation as the case continues.
The High Court heard the generic terms and conditions West Bromwich referred to were “inconsistent” with the particular terms agreed in the offers of tracker mortgages.
Michael Ashcroft QC, for Property 118 Action Group, said: “It clearly states that the rate shall be the same as the base rate plus 1.99 per cent, and it therefore, in my submission, defines the only circumstances in which the rate can be varied, and also provides when and how such variation is to take place.”
He added that given the clear terms of the offer of loan, this mortgage should not and could not be interpreted as one that, in effect, provided that the rate of interest after the fixed-rate period would be whatever the respondent decides it should be.
He said: “If you said to a reasonable borrower this is what this contract means, in my submission, the borrower would be astonished by that result.”
If you said to a reasonable borrower this is what this contract means, in my submission, the borrower would be astonished by that result. Michael Ashcroft QCMr Ashcroft added that the particular “bespoke” terms in the tracker mortgage contracts should be given “greater weight” than the standard terms and conditions, which apply to a range of deals including standard variable rate mortgages.
“If you think there is some inconsistency, even a small one, then you should give greater weight to the bespoke, specific clauses,” he stated, adding: “If there is an arguable inconsistency, as the judge [Mr Justice Teare] found, then that is fatal for the respondent on this issue.”
Mr Ashcroft told the court if West Bromwich is allowed to vary the interest rate at any time, it “essentially deprives the contract of any tracker element whatsoever”.
West Bromwich maintained that borrowers were free to “terminate at any time” if they were unhappy with the new terms offered to them, but Mr Ashcroft described that as a “weak attempt to answer our commercial common sense arguments”.
The court heard that borrowers may be left unable to remortgage their properties on similar terms if they terminated contracts, and could lose their homes entirely in a “particularly difficult market”.
Mr Ashcroft claimed that the standard terms and conditions were inconsistent with the “core irreducible purpose and intent” of the tracker mortgages, which are designed to limit increases in interest rates.
The increase in December 2013 affected 6,250 people with tracker mortgages, and is said to have doubled many borrowers’ monthly repayments.
A judgement is due on the appeal in about four weeks.
During a break in proceedings, Mr Alexander confirmed that he will take the case to the Supreme Court if the appeal fails.
