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Buy to Let Borrower Triumphs in Tracker Mortgage Test Case

Brochures designed to generate sales inevitably paint products in a positive light but, in a ground-breaking victory for a ‘buy to let’ borrower, the Court of Appeal has emphasised that they can create binding commitments that may prevail over inconsistent contractual terms.

The borrower had taken out a 25-year ‘tracker’ mortgage with a building society. The mortgage offer stated that interest on the loan would be fixed at 6.29 per cent for a certain period and, thereafter, at 1.99 per cent above the Bank of England base rate. However, the mortgage contract itself stated that the interest rate could be varied by the lender at any time and that the loan was repayable in full on the lender giving one month’s notice, with or without default by the borrower.

The borrower’s challenge to those terms of the contract was dismissed by a judge. In allowing his appeal against that ruling, however, the Court noted that his reasonable understanding that the interest rate would only fluctuate with the base rate was reinforced by the terms of the mortgage offer.

He also had a reasonable expectation that, save in the event of a default on his part, repayment of the loan would not be sought until the end of the 25-year term. In those circumstances, the disputed terms were inconsistent with the description of the product in the mortgage offer and were thus not incorporated in the contract.