The Court of Appeal in London has backed a buy-to-let investor who claimed that the terms of his mortgage were unfair.
The case was brought by Mark Alexander, representing pressure group Property 118 Action Group, and challenges the terms of a product offered by lender West Bromwich Mortgage Company.
Alexander took out a 25-year interest-only mortgage for a buy-to-let property. The mortgage offer stated that the interest rate would be fixed for a period of time, before becoming a variable rate at 1.99% above the Bank of England base rate.
However, the lender’s terms and conditions stated that the rate of interest could be varied by the lender, and the lender could demand repayment in full with one month’s notice.
The Court of Appeal ruled today that those added terms are inconsistent with the product that the mortgage company was offering.
“There is no hint in the offer document that the rate will, or can ever, be different to the Bank of England base rate plus 1.99%,” Appeal Court Judge Lord Justice Hamblen wrote in his section of the judgment. He said that the extra terms and conditions, if written into a single clause along with the terms of the mortgage offer, would make a reasonable borrower “question what is being agreed”.
“Such a clause would be to the effect that the variable rate is to be the Bank of England base rate plus a premium of 1.99% subject to the lender’s right to vary that at any time.
“That is negation; not modification of qualification,” Hamblen wrote.
For similar reasons, the lender’s assertion that it could demand full repayment giving a month’s notice without reason is also “inconsistent”, Hamlen said.
The “main purpose” of the mortgage was to provide financing for 25 years. In this situation, “the lender is only agreeing to provide the loan for 25 years unless and until he decides to require eagerly repayment, and that accordingly he is effectively under no obligation to provide for that term”.
“That, again, is negation, not modification of qualification,” he said.
Mark Robert Alexander (as representative of Property 118 Action Group) v West Bromwich Mortgage Company Ltd
Court of Appeal (Sharp LJ, Sir Brian Leveson P, Hamblen LJ) 8 June 2016
