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Date set for West Brom rate hike appeal

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Landlords fighting a West Bromwich Building Society rate hike will take their case to the Court of Appeal on 27 April.

A group of landlords are suing the society because of its decision to increase its tracker rate mortgages in September 2013.

At the time the lender told 6,700 landlords that it would increase rates from 1.49 per cent to 3.49 per cent from 1 December 2015. The borrowers all had loans with West Bromwich Mortgage Company, its now defunct specialist lending arm.

The lender said the increase reflected the rising cost of mortgage funding, and that the firm had no choice but to raise rates.West Bromwich said the changes were allowed under the terms of their mortgage agreements.

The West Bromwich tracker mortgages had been advertised as products that would mirror base rate, but the lender argued that its terms and conditions allowed it to vary interest rates according to market conditions.

The rise meant some landlords saw the interest rate on their mortgages double.

Landlord pressure group Property 118 said the rise was unfair as base rate had not risen. The body then launched legal action against West Bromwich in the High Court in November 2013.

More than 400 landlords clubbed together to collect more than £500,000 in a fighting fund to cover legal costs.

Separately, angry landlords took their cases to the Financial Ombudsman Service. However the FOS threw the cases out in November 2014, saying that the lender was allowed to raise its rates.

The High Court sided with West Bromwich in January 2015, saying the lender was allowed to increase its rates to handle changing market conditions. But now the group have been given a date to appeal the decision.

After the ruling, a West Bromwich 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. The increase was made to reflect changing market conditions and the need for us to carry out our business prudently, efficiently and competitively and in the best interests of our members.”

The spokesman said that the rate increase had been reduced from 2 per cent to 1.5 per cent, due to “improved market conditions”.

The landlords then took the case to the Court of Appeal, which will hold a hearing on 27 April.

Cotswold Barristers barrister Mark Smith, representing the landlords, says the body wants the decision in the High Court to be reversed and the borrowers’ claims allowed.

Smith says if the Court of Appeal sides with West Brom, this could set a precedent for more lenders to raise rates without a base rate rise.

He says: “Other lenders who have securitised their books and now run the loans at a loss, as West Brom are doing, will scrutinise their conditions closely. Their solvency depends on it. They took a gamble with securitisation, and are now looking to pass the losses to the borrowers.”

A spokesperson from West Bromwich Building Society said: “We have always maintained that we have acted entirely appropriately and in the best interests of our membership. This position is supported by the decision of the courts last year.”

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