West Brom may lose out on millions in legal row

The challenge is to the society raising rates on tracker mortgages for buy-to-let private landlords by 1.9 per cent. According to the society, 6,700 borrowers are affected. If the action is successful, barristers say the society could lose over £15m a year if the 1.9 per cent rise goes through and the rate does not change during the lifetime of the mortgages.

Society chiefs dispute this figure, saying the rise is based on fluctuating market conditions and could change so they say they do not know themselves how much the rise would equate to over all the properties affected.

Mark Smith, from Cotswold Barristers, has been instructed by 403 affected mortgage holders to act against West Bromwich Mortgage Company.

He said: "The landlords have made individual complaints, which have all been rejected and have offered to go to arbitration, which has been refused.

"The West Brom suggest that the Financial Ombudsman decides, but this takes months; complaints made in September 2013 have not even been decided on yet, and there is no facility for a group action.

"I can tell you that the West Brom stand to lose £15m to 20m per year if they are not allowed to do what they are trying to do, and the base rate does not rise."

Barristers are now ironing out issues with the society's legal team before the case is heard in the Commercial Court in London.

The society stands by increasing the rate in a bid to help the company's wider membership, including a large number of its savers.

A spokesperson from the West Brom said: "Rates have been increased to reflect changing market conditions and the need for us to carry out our business prudently, efficiently and competitively.

"We are also acting to balance the interests of the society's wider membership, particularly our savers who continue to be adversely affected by the prolonged low interest rate environment.

"We are confident that we have acted entirely within the terms and conditions of these buy-to-let mortgages."