Editor’s note: West Brom: a case in point

Last week saw a court judgment handed down that some claim will have severe knock-on effects on the way lenders are permitted to charge interest.

The Court of Appeal found that West Bromwich Building Society should not have raised interest rates on buy-to-let tracker mortgages without a rise in Bank of England base rate.

But the big question now is whether the case sets a precedent that can be used to challenge other lenders that have acted in a similar way.

On the face of it, the main lenders in the frame are Skipton Building Society, Manchester Building Society and Bank of Ireland, although there are others.

Immediately after the West Brom judgment, the public face of lenders was calm, although there were rumours of crisis talks at trade bodies and lenders behind closed doors.

But now that lawyers have had time to pick over the case, lenders have come out swinging. The consensus of Skipton and the Building Societies Association is that the outcome of the West Brom case is isolated and the findings cannot be carried over to other examples. Mortgage Strategy understands the Manchester feels the same way.

But Property 118 and its lawyers disagree and want to bring cases against the above three lenders. Unless they have a change of heart, the only thing standing in the way of fresh legal challenges is the need to raise enough cash.

Unfortunately for the industry, Property 118 members have plenty of that. And they will have even more when some of them get their share of the £27.5m payout from West Brom.

If more court cases find against lenders, an interesting question arises as to what extent this may in fact be bad for consumers if it means lenders make up for a sudden lack of income in one area by increasing costs in another.

Regardless, it looks like more legal action is inevitable. Of course, it is too early to say which side’s arguments will prevail. The only surefire winners here, in the short term at least, will be lawyers.