West Brom announced in September 2013, that it would be increasing its rates by 2% from 1.49% to 3.49% due to "changing market conditions", despite the Bank of England's base rate remaining at 0.5%.
A spokesperson for West Bromwich said:
“We have always maintained that we acted entirely within the terms and conditions of these buy to let mortgages and the court’s ruling wholly justifies our position.
“The increase was made to reflect changing market conditions and the need for us to carry out our business prudently, efficiently and competitively and in the best interests of our members.
“We have approached this in a fair manner, passing on any improvements in market conditions by reducing the additional percentage borrowers have to pay.”
West Bromwich had described the buy-to-let mortgage as giving borrowers "the certainty of knowing that the rate you pay will move in line with bank base rates", however Mr Justice Teare ruled that the lender was within its rights to increase the premium on the rate it charged above the Base Rate.
In 2013, the Bank of Ireland wrote to thousands of its borrowers advising that they would be increasing their margin over bank base rate on lifetime tracker mortgages, meaning some mortgage payments would’ve doubled or even tripled.
The Bank later backed down in relation to about 10% of those affected, but the West Brom decision has sparked concerns that other providers could now be tempted to hike tracker rates despite a static base rate.
George Spencer, chief executive at property and technology company Rentify, said:
"This adds a considerable £330 per month to the mortgage payment on a £200,000 loan, which will significantly impact landlords' profit margins.
"Landlords with other lenders will be concerned that they will follow suit so it is important to be vigilant."
