Thousands of buy-to-let landlords are line for a multimillion-pound pay out after winning a legal battle against one of Britain’s largest building societies.
The West Bromwich Mortgage Company were ruled to have unlawfully increased tracker rates on buy-to-let mortgages by 1.99 per cent because the Bank of England had not changed the base rate from 0.5 per cent since 2009.
Finance expert, Mark Alexander, led a group of 400 people in raising £400,000 to fight The West Bromwich Mortgage Company, a subsidiary of the West Bromwich building society, after they had raised concerns in a landlord’s forum on his property website.
Jonathan Westhoff, chief executive from West Bromwich building society, said: "At all times we acted to ensure we were treating customers fairly and that our approach was in the best interests of the Society and its members as a whole."
The West Bromwich Mortgage Company classed landlords with their tracker mortgages as ‘investors’ rather than ‘consumers’ so as to legitimise the increase their tracker mortgage rates.
However, tracker mortgages are supposed to follow the Bank of England’s base rate which remained unchanged, and the Court of Appeal ruled the mortgage lender’s decision to hike the payments on landlord’s mortgages as illegal.
The West Bromwich Building Society said it was “disappointed” with the ruling but that they would accept the decision adding: "We will now contact all affected borrowers and ensure we process promptly any reimbursement they are due."
After what has been described as a “David v Goliath” court battle affected borrowers will receive a refund equal to the additional interest they were wrongly charged.
It is believed that this will cost the West Bromwich Building Society £27.5m.
The average payout is estimated to be around £4,000 and there have been over 6,000 affected borrowers.