Homeowners who are unable to switch their mortgages onto better rates have lost their appeal against TSB in the Court of Appeal, in a ruling that could affect plans to renovate or upgrade homes.
The decision confirms that the bank can continue to charge higher standard variable rates on mortgages inherited from Northern Rock, even when borrowers are up to date with payments.
For anyone buying a house or thinking about improving their current home, this case is a reminder that mortgage costs can be harder to reduce than many people expect, and careful financial planning is key before starting any project.
What the ruling means for mortgage prisoners
The case, Breeze and Others v TSB Bank PLC, involved borrowers with mortgages originally taken out with Northern Rock. After Northern Rock was nationalised in 2008, its mortgages were transferred to TSB under the Whistletree brand.
These borrowers are often referred to as “mortgage prisoners,” a term used by the media and consumer groups to describe people who are unable to switch to a new mortgage deal.
They may be up to date with payments, but cannot meet affordability checks or find a lender willing to take on their mortgage. The borrowers argued that TSB was keeping them on a high standard variable rate while its mainstream customers had lower rates.
The Court of Appeal said the contract only allowed TSB to vary the rate and that there was no requirement to match other customers. The judge explained that forcing a switch would have “frozen the inherited SVR until a choice was exercised” and called that commercially illogical.
The court also rejected the borrowers’ argument that they could use a linked unsecured loan as a “back door” to get relief under the Consumer Credit Act.
Key takeaways for homeowners and renovators
The ruling provides clarity for lenders but is a setback for borrowers hoping to reduce their mortgage payments.
The judge highlighted that “section 140B relief is not permitted in connection with a regulated mortgage,” making it clear that legal remedies cannot be used to lower rates for mortgage prisoners.
By confirming that TSB can maintain higher inherited mortgage rates and that Consumer Credit Act remedies cannot be used to lower regulated mortgages, the Court of Appeal has created a legal precedent.
This means anyone planning renovations, self-build projects, or other home improvements should review their mortgage carefully and plan finances ahead, because this decision makes it clear that the courts are unlikely to help lower mortgage costs in these cases.
How it affects home financing and renovations
For homeowners planning renovations, this ruling shows that refinancing might not always be possible, even if mortgage rates go down.
Many people are watching are mortgage rates going down to see if they can move to a cheaper deal, but for mortgage prisoners, their rate may stay high.
This could mean smaller budgets for home improvements or delays in projects. People looking for alternative options may need to consider things like self build mortgages or renovation mortgages.
