High Court rules TSB did not breach contract terms with 'mortgage prisoners' over interest rates

Over 2,000 individuals claiming to be "mortgage prisoners" did not have the "express" terms of their contracts violated by being charged varying interest rates by a bank, according to a judge's ruling. Approximately 2,500 people are taking legal action against TSB Bank concerning their "Whistletree" mortgages, with the High Court in London informed earlier this year that they are paying an interest rate that TSB is not permitted to charge.

The bank disputes the claims, asserting that they are "plainly misconceived" and that charging borrowers different rates is a "basic feature of the mortgage market". During a hearing in July, Judge Nicholas Thompsell, presiding as a High Court judge, was asked to make a decision on several preliminary issues in the case.

In a judgement on Wednesday, he stated that TSB "has not breached the express terms" of the contracts by charging different interest rates. Tim Lord KC, representing the borrowers, informed the court in written submissions that they witnessed their initial lender, Northern Rock, collapse in the 2008 financial crisis, with their mortgages later assumed by TSB.

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They were charged a standard variable rate (SVR) which Mr Lord claimed was 2.29% higher than TSB's own SVR and differed from the fixed or tracker rates they paid under Northern Rock.

Mr Lord highlighted that TSB required borrowers to apply for a new mortgage to access a cheaper rate or switch banks, but many were trapped by stricter affordability assessments introduced in 2014, leaving them "imprisoned".

He argued that some customers had been stuck paying higher interest rates for up to eight years, making the claim "of grave financial importance" as TSB had "disproportionately profited" from them.

Sonia Tolaney KC, representing the bank, dismissed the complaints in her written submissions as having "no merit" and being "plainly misconceived".

She asserted that TSB's practice of offering "offers different products, at different prices, to different customers, with different risk profiles" was standard and fair.

In his 49-page judgment, Judge Thompsell stated that TSB took over from Northern Rock and continued administering the same Standard Variable Rate (SVR).

He determined: "The defendant has not breached the express terms of the claimants' mortgage contracts by charging the claimants interest rates based on the Whistletree SVR and not on the TSB SVR."

"The Whistletree SVR should be regarded as the continuation of the original SVR originally operated by Northern Rock, and not as a new rate."

The case is set for a further hearing at a future date.

After the court's ruling, a TSB representative stated: "We welcome the court's decision today, which recognises that TSB acted in accordance with the terms of Whistletree mortgage contracts."

TSB further commented that since 2016, more than two-thirds of their customers had either moved to a new mortgage product with Whistletree or another lender, or had fully paid off their mortgages. The bank also noted that it regularly reminds borrowers about their option to switch products at least once a year.

Reflecting on the verdict, Matthew Patching, partner at the legal firm Harcus Parker representing the affected clients, conveyed: "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."

Not satisfied with the partial nature of the judgement, he added: "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."