Around 2,500 people are bringing legal action against TSB Bank over their mortgages with the case arguing that the bank financially exploited them by charging them significently higher rates than its own mortgage customers
Thousands of mortgage borrowers have been hit with a huge blow after the latest ruling in a major court case.
TSB is in the process of being sued in a class action by people who say they are “mortgage prisoners”. Mortgage prisoners took out loans before the 2008 financial crisis, when lending rules weren’t as tight, with lenders that went on to fail such as Northern Rock and Bradford & Bingley.
After the lenders collapsed, many of the loans were sold to firms that are not mortgage lenders, and so were not able to offer them cheaper products. TSB bought £3.3billion of Northern Rock mortgages, which covered around 27,000 homeowners in 2015, under its Whistletree brand.
These mortgage customers say they have been trapped on uncompetitive rates ever since – including being rejected when they apply for cheaper mortgages elsewhere because of new stricter borrowing rules. Around 2,500 people are bringing legal action against TSB Bank over these mortgages and are represented by the law firm Harcus Parker.
The case argues that the bank exploited its Whistletree customers as the SVR it applied to the mortgages was 4.79% – which was 4.29% above the Bank of England’s base rate at the time, and 2.29% higher than TSB’s own SVR rate.
However, TSB has repeatedly opposed the claims. According to Harcus Parker, the average claim is estimated to be worth between £20,000 and £30,000. In a High Court preliminary hearing this week, Judge Nicholas Thompsell said that TSB had not breached the express terms of the claimants’ mortgage contracts by charging interest rates based on the Whistletree SVR and not the TSB SVR.
In a 49-page ruling, Judge Thompsell said that TSB was “in the shoes originally filled by Northern Rock” and was “continuing to administer the same SVR as Northern Rock had administered”. He said: “The Whistletree SVR should be regarded as the continuation of the original SVR originally operated by Northern Rock, and not as a new rate.”
Following the ruling, a TSB spokesperson said: “We welcome the court’s decision today, which recognises that TSB acted in accordance with the terms of Whistletree mortgage contracts.” The bank added that more than two-thirds of customers had switched to a new mortgage product with Whistletree or another lender, or settled their mortgage, since 2016, and that borrowers are reminded that they can switch at least annually.
In a statement, Harcus Parker pointed out that further key elements of the claim had yet to be ruled on. For example, the court has not yet determined whether the clauses within the claimants’ contracts were fair. Matthew Patching, a lawyer for the firm, told the Reuters news agency: “Our clients are pleased that the judge seemed to appreciate the difficulties they have faced since the collapse of Northern Rock and the purchase of their mortgages by TSB.
“Although they are disappointed that the result of the preliminary issues trial is not to immediately determine the claims in their favour, they are looking forward to progressing their claims to the next stage and – ultimately – to a full trial.” A further hearing in the case is expected to be held at a later date.
The non-profit group UK Mortgage Prisoners added that it will be meeting with the Treasury on October 1 to discuss what solutions the new Labour government will introduce in relation to residential mortgage reform, urgent legislation and regulatory intervention.
Lead campaigner for UK Mortgage Prisoners Rachel Neale told the Financial Times: “We will not rest until action is taken by government and regulator. It is abhorrent that our members continue to suffer injustice 16 years on from the global financial crisis due to a lack of setting adequate protections in place upon the sales and transfers of our mortgages. No residential mortgage should sit in the clutches of profiteering debt collectors who offer no mortgage products.”
