Buy-to-let property investors who were incensed when their ‘tracker’ mortgage rates were increased out of the blue have been told by a High Court judge that, had they read their contracts carefully, they would not have been surprised.
An action group made up of more than 300 borrowers mounted a test case after 2 per cent was added to what they had believed was a ‘fixed’ tracker mortgage rate. With the bank base rate stalled at a record low of 0.5 per cent, the lender said that the increase was justified ‘in light of market conditions and in order to carry out its business prudently, efficiently and competitively’. The controversial move affected more than 6,000 borrowers who had buy-to-let portfolios of three or more properties.
The borrowers argued that there was a fatal inconsistency between the terms of their mortgage offer letters and the contractual terms which underpinned them, and that the former should take precedence. It was submitted that the lender’s margin could not be changed during the full term of the 25-year mortgages and that the interest payable was linked to the bank base rate and nothing else.
However, in dismissing those arguments, the judge ruled that there was no such inconsistency and noted that the contracts clearly stated that the rate payable could be ‘varied at any time’. The mortgage offers ‘did not state’ that the borrower’s initial premium of 1.99 per cent would not increase, nor that the interest rate payable would only move in line with the bank base rate.
The judge noted that dispute came down to a pure issue of contractual interpretation and whether it was ‘fair’ of the lender to more than double the premium it charged was simply ‘not a matter before the court’.