Thousands of customers at the West Brom Building Society are ready to launch legal action over increases to tracker mortgage rates.
The company is introducing a two per cent rate hike for its 6,700 buy-to-let tracker mortgage borrowers from December 1.
This will lead to many customers having to make much higher repayments than they currently do.
But the move has led to 1,000 people registering an interest in a ‘class action’ which will challenge the legality of the increase.
A ‘class action’ is when a number of people affected by something get together and have one legal case rather than pursuing separate legal cases.
Neil Patterson from property publishers Property118.com, which is hoping to launch the action, is currently waiting on legal opinion as to how to proceed with the case.
The company has said the action will cost around £100,000 and it has already raised enough to cover the initial legal work and the costs of obtaining counsels’ opinion.
The company’s website states it started the campaign as it believes ‘the actions of West Brom are immoral’ and adds ‘we believe the actions of West Brom are unlawful, i.e. they have no legal grounds to increase their tracker rate margins’.
The website says it is also fearful of other lenders following suit.
All borrowers affected are landlords of multiple property portfolios and are operating all over the country and not just within the West Midlands. They took out their mortgages between 2006 and 2008 and are paying an average rate of 1.65 per cent.
In a statement the West Brom said: “Market conditions have changed significantly since these buy-to-let mortgages were taken out, resulting in an increased cost of funding them. At the same time, the landlords in question have seen their interest rates fall by up to 80 per cent, with a consequent increase in their income.
“We have held off on making any changes to rates for as long as we feel reasonable, but have acted now to balance the interests of the Society’s wider membership.”