West Bromwich Building Society has posted a loss before tax of £23.7m for the six months to 30 September 2016.
The society, which posted a £6m profit for the same period in 2015, blamed the loss on the Court of Appeal decision in overturning the previous High Court judgement in our favour.
Back in June, the Court of Appeal has ruled West Bromwich Building Society was wrong to vary mortgage interest rates in the absence of a change in the Bank of England base rate.
West Bromwich Building Society was taken to court by landlords over an increase in their tracker mortgage rates.
Mark Alexander, who runs Property 118 Action Group, representing 350 buy-to-let landlords, accused the building society of illegally increasing the interest rate on their mortgages by nearly 2 per cent in December 2013.
The landlords claimed West Bromwich’s tracker mortgages were sold on the basis that the interest rate would be fixed to the Bank of England’s 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 Bank of England’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 raised more than £500,000 to take the case to the Court of Appeal.
However in June the Court of Appeal overturned Mr Justice Teare’s decision.
The building society’s half-year results therefore included a one-off cost of £27.5m to refund certain buy-to-let customers for a proportion of interest charged since December 2013.
The society also revealed gross residential mortgage lending for the half year of £441m, up nearly 50 per cent from the previous year and members' savings balances maintained at £4.4bn.
Arrears reduced across residential mortgages (falling from 1.07 per cent of mortgage balances at 31 March 2016 to 0.88 per cent at 30 September 2016) and further reductions in non-core lending.
Commercial lending has reduced by £46m (6.8 per cent) since the year-end to £634m.
Profitability, before the one-off impact of the buy-to-let refund, would have moved from £1.3m for the 6 months to 30 September 2015 to £3.8m for the same period in 2016.
emma.hughes@ft.com
