THOUSANDS of borrowers who claim they are ‘mortgage prisoners’ have been ruled against by a high court judge.
The case was brought forward by former Northern Rock mortgage holders who claim TSB Bank charged them unfair interest rates on their “Whistletree” mortgages.
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The borrowers claim they have been stuck paying a standard variable rate (SVR) 2.29% higher than TSB’s own rate, in some cases for up to eight years.
The bank opposed the claims, and said that charging borrowers different rates is a basic feature of the mortgage market.
In the ruling, Judge Nicholas Thompsell said TSB has not breached the terms of the borrowers’ mortgage contracts.
The case, led by borrowers’ lawyer Tim Lord KC, focused on Northern Rock customers whose mortgages were transferred to TSB after the bank collapsed in 2008.
Lord argued that many customers were unable to switch to cheaper rates or move to another lender because stricter mortgage rules introduced in 2014 meant they couldn’t pass new affordability checks.
He claimed this left them mortgage prisoners, with TSB “disproportionately profiting” from the situation.
But TSB, represented by Sonia Tolaney KC, said the bank offers different products to customers with varying risk profiles, and that this was “neither surprising nor unfair.”
In his 49-page ruling, Judge Thompsell agreed, stating that TSB was following the same SVR Northern Rock had previously applied.
He ruled that the rate, now called the ‘Whistletree SVR’, is simply a continuation of the original rate and that TSB was acting within the terms of the mortgage contracts.
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.”
TSB added that more than two-thirds of affected customers had switched to a new mortgage product or settled their mortgages since 2016.
The borrowers lost this round but their legal team isn’t giving up.
Matthew Patching, a partner at law firm Harcus Parker, said: “Our clients are disappointed with the result, but are looking forward to progressing their claims to the next stage.”
A further hearing is expected to take place in the case.
How is the aftermath of Northen Rock still being felt?
Mum of four and self-employed hairdresser has had to pay more than £91,000 extra on her mortgage since 2008
Mortgage prisoner Rebecca Wendel is currently paying 9.79% interest on her home loan.
This means that her mortgage bill is £2,150 a month, which is up from £1,049 in August 2022, when she was still paying over the market rate at 6.75%.
Since the collapse of Northern Rock in 2008, which saw her loan sold to Heliodor Mortgages, part of Topaz Finance, she has been paying excessive amounts.
Sadly this is not uncommon, with Rebecca making up just one of 200,000 homeowners who had their mortgages sold to finance companies, which have continued to charge above market rates for the loans.
As a result, these people have become known as mortgage prisoners because the stricter lending restrictions mean they cannot pass affordability checks which would allow them to access lower rates.
What is a mortgage prisoner?
A mortgage prisoner is a homeowner who is unable to switch to a better mortgage deal, even though they are keeping up to date on their payments.
Mortgage prisoners are often trapped with their existing mortgage, paying more money than they need to.
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This is because when an introductory mortgage rate ends, the borrower typically moves on to the lender’s SVR, which is usually more expensive than the previous rate.
In 2021, the Financial Conduct Authority (FCA) estimated that there were 47,000 mortgage prisoners in the UK.
