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The decision provides important appellate authority for lenders managing legacy or "back book" mortgage portfolios and gives welcome clarity on the boundaries of the court's remedial powers under sections 140A–C CCA 1974
The Court of Appeal has dismissed an appeal by former Northern Rock borrowers against TSB on two preliminary issues, confirming (i) the contractual entitlement of a transferee lender to continue operating an inherited standard variable rate (SVR), and (ii) the strict limits on the court's powers to grant relief under the Consumer Credit Act 1974 (CCA) unfair relationship regime where regulated mortgage contracts are involved: Breeze & Ors v TSB Bank plc [2026] EWCA Civ 32.
For lenders, the decision provides appellate support for two points that frequently arise in legacy portfolio and back‑book contexts. First, it confirms that (on the documentation in issue) a transferee lender was not contractually required to migrate borrowers onto a different pre‑existing SVR used for another portfolio, and could continue to operate the inherited SVR applicable to the transferred cohort. Second, it provides welcome clarity on the limits of the court's remedial powers under sections 140A–C CCA where regulated mortgages are concerned. Even where borrowers seek to frame an unfair relationship claim by reference to an unsecured loan in a linked structure, s.140A(5) prevents the court from making s.140B orders "in connection with" a regulated mortgage contract, including relief calibrated by reference to sums payable under that mortgage.
This follows the High Court's preliminary issues decision in the same litigation, which we discussed in our earlier blog post (see here).
We consider the decision in further detail below.
Background
The claimants are 392 individuals who entered into residential mortgage contracts with Northern Rock plc (Northern Rock). Northern Rock was nationalised following the 2008 financial crisis. In July 2016, a portfolio of the mortgage contracts was transferred to TSB, which has since administered them under its "Whistletree" brand. The claimants contend they are "mortgage prisoners" and allege that, after the transfer, TSB should have applied a different (lower) SVR used in another part of its mortgage business rather than maintaining the Whistletree SVR applicable to their cohort.
In addition, a subset of claimants purchased "Together" products comprising a mortgage (the Together Mortgage) and a linked unsecured loan (the Together Loan). They pursued relief under the CCA unfair relationship regime on the basis that the relationship arising out of the loan (taken with any related agreement) was unfair, and sought redress in a manner that would in substance engage their regulated mortgage contracts.
High Court decision
The High Court considered two preliminary issues, finding in favour of TSB in respect of both (a further issue (Issue 2) was resolved prior to the hearing):
- Issue 1 was whether TSB had breached the express terms of the Together Mortgages by charging interest based on the Whistletree SVR rather than applying a lower SVR operated elsewhere within TSB's mortgage book. The High Court found that there was no breach of contract.
- Issue 3 concerned the scope of unfair relationship remedies available via the CCA: whether s.140A(5) CCA precludes an order under s.140B(1) in relation to a regulated mortgage contract, or quantified by reference to sums payable under such a contract, irrespective of whether the regulated mortgage is treated as the credit agreement itself or as a related agreement to another credit agreement. The High Court held that s.140A(5) precluded the remedies sought by the claimant in respect of the mortgage.
The claimants appealed. For a more detailed analysis of the High Court decision, see our blog post.
Court of Appeal decision
Issue 1: no breach of express terms by maintaining the inherited SVR
The claimants all entered into their loans using a variation of Northern Rock's General Mortgage Conditions. It was common ground between the parties that the condition governing Northern Rock's express right to transfer all of its rights under the contract (including the right to set interest), contained permissive rather than mandatory language. In particular, if the mortgages were transferred from Northern Rock to another lender, the General Conditions provided:
"...that person may set the interest charged under the Offer by reference to that person's own (or one of its own) standard variable mortgage base rates." (Emphasis added)
In the view of the Court of Appeal, it inevitably followed that the new lender: (a) was not obliged to use its own SRV; and (b) would be entitled to use the SVR inherited from the transferor. Indeed, the claimants expressly accepted that TSB could have continued to charge the Whistletree borrowers the rate inherited from Northern Rock.
The claimants made a number of contractual interpretation arguments as to why TSB nonetheless acted in breach of the General Conditions by failing to apply one of its own SRVs. However, the Court of Appeal agreed with TSB's interpretation of the General Conditions. It held that on the wording of the General Conditions and offer documentation, TSB as transferee lender was entitled to continue operating the inherited Whistletree SVR applicable to this cohort, and was not obliged to switch borrowers to a different (lower) SVR used for other mortgage portfolios within TSB.
Issue 3: regulated mortgage contracts remain outside the scope of s.140B
S.140B CCA sets out the powers of the court in respect of remedying unfair relationships and sets out a list of remedies which the court has broad discretion in awarding. However, s.140A(5) CCA imposes a limit, so that orders made under s.140B "shall not be made in connection with a credit agreement which is an exempt agreement [...]". For present purposes, an "exempt agreement" includes regulated mortgage contracts such as the Together Mortgages.
On Issue 3, the Court of Appeal confirmed that s.140A(5) CCA imposes a limit on the court's ability to grant relief under s.140B where a regulated mortgage contract is involved. The Court of Appeal rejected the claimants' attempt to circumvent this limit on the court's jurisdiction by characterising the Together Loan as the "credit agreement" and the Together Mortgage as a "related agreement", rather than vice-versa. In the view of the Court of Appeal, the order would still be "in connection with" the regulated mortgage contract.
Instead, the Court of Appeal held in favour of TSB's position that the statutory bar is not confined to orders that directly alter the mortgage terms. It also precludes relief under s.140B that would be quantified by reference to sums payable under a regulated mortgage contract such as the Together Mortgage. The Court of Appeal characterised the "Together" claimants' claim as:
"...a transparent attempt to avoid the consequences of the statutory scheme by using their unsecured loans as a backdoor to obtain relief in respect of their regulated mortgage contracts which they accept they cannot obtain by the front door".
Accordingly, the appeal was dismissed.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
