Thousands of buy-to-let landlords who took out tracker mortgages with the West Bromwich Mortgage Company are set to be refunded more than £27.5 million in total.
The lender, which is part of the West Bromwich Building Society, was forced into handing back cash after the Court of Appeal ruled it was wrong to increase the charges for its lifetime buy-to-let tracker mortgages.
The move followed an announcement in September 2013 that the lender’s tracker rate would increase by 1.9%, despite the Bank of England's base rate being unchanged.
London tenants spend two thirds of their income on rent
Meanwhile, it has been revealed that tenants in London spend nearly 70% of their income on rent and bills. The research comes from estate agents Portico who say that tenants need to spend three-and-a-half days of their weekly wages to pay rent, council bills and taxes.
Research suggests that the average London worker has around £200 in disposable income for spending on luxury items and food. The firm’s managing director, Robert Nichols, said: “Londoners are having to work later into the week before they can start spending some of their hard earned cash and this clearly shows how rents in London have skyrocketed.
“While rents are growing, public transport is improving and we are seeing large numbers of tenants moving further out to boroughs such as Barking and Ealing so they can benefit from affordable rents as well as a quick commute. They will also have a larger disposable income at the end of the week in their pockets.”
Buy-to-let landlord mortgages customers
In a letter to its buy-to-let landlord mortgage customers, the lender also suggested that it would be calling-in mortgages with notice of 30 days if they decided that they were dealing with unprofitable businesses. Now, 6,500 landlords look set to receive refunds.
The legal action was brought about by a mortgage broker who found backing from 350 landlords who said their tracker mortgages had been sold on the basis that their interest rates would be aligned with the Bank of England's base rate. That base rate has remained unchanged at 0.5% since March 2009.
However, the lender argued that it had discretion to change its rate in the small print.
The broker originally lost his High Court case but on appeal, for which he had to raise £500,000, he won his case.
A spokesman for the lender said they strive to ensure that their customers are treated fairly and their approach has always been in the best interests of the society's members and the society and that all borrowers affected by the announcement will receive their reimbursements promptly.
The Court of Appeal also ruled that the lender could not call in its mortgages unless the borrower was in arrears.