Paragon (t/a National Home Loans Corporation plc until 1997) was claiming possession from Mr and Mrs Nash in South Norwood for late mortgage repayments.
Nash claimed that they were being made to pay substantially over the market rate of interest for secured loans, and were unable to find another lender because they had fallen into arrears.
Dyson LJ held that the power to vary the interest rate at its discretion had to be exercised in a rational and honest way.
Nor was the term unfair under UCTA 1977 section 3(2)(b)(i), because part of the ‘contractual performance’ was the discretion and its exercise was what could be reasonably expected.
John McFall of the Treasury Select Committee said that banks are ‘defying the laws of financial arithmetic’ by not passing on the cuts in interest rates to consumers.