Britain's TSB did not breach mortgage terms, London judge rules

Britain's TSB bank , which has been sued in London's High Court by hundreds of claimants alleging they were "mortgage prisoners", did not breach the terms of its home loan deals, a judge decided on Wednesday in a preliminary ruling.

Judge Nicholas Thompsell ruled that the Spanish-owned bank, whose Whistletree subsidiary bought the loans eight years after the UK government bailout of Northern Rock in 2008, had not violated the express terms of claimants' contracts with its interest rates.

TSB welcomed the ruling. Harcus Parker, the law firm representing claimants, noted that the court had yet to reach a decision on other questions, including whether clauses within the contracts were fair.

"Although they (clients) 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," said Harcus Parker lawyer Matthew Patching.

Almost 400 former Northern Rock claimants allege they became trapped into paying high variable mortgage rates, each facing around 30,000 pounds (around $40,000) on average in extra interest payments because they were barred from using cheaper products.

Harcus Parker argues the test case could open up claims from around 2,000 other claimants in a lawsuit that has been valued at up to 75 million pounds.

TSB has dismissed the case as misconceived, arguing it is a common feature of the mortgage market to charge different rates to different customers with different risk profiles, which was neither surprising, unfair, nor a breach of any obligations.

When the bank acquired the Whistletree mortgages, it applied a standard variable rate of 4.79 per cent, 4.29 per cent above the bank base rate at the time. TSB said in court filings that it subsequently varied the rate, both up and down, in line with bank rates.

Northern Rock once offered attractive fixed-rate mortgages and high loan-to-value deals, sometimes alongside an unsecured loan that allowed customers to borrow more than the assessed value of their properties.