The answer is almost certainly no. This point was litigated in a series of cases involving Paragon Finance a few years ago. Paragon was a finance company that relied on the money markets for funding, and it lent on a self-certification basis, always charging more than other lenders. However, as rates declined generally, Paragon did not reduce its rates. The CA held that there was an implied term in the mortgage agreement that interest rates would not be set dishonestly, for an improper purpose, capriciously or arbitrarily, but this would not extend to an implied term of unreasonableness. Thus, the court would not imply a term requiring a lender to set reasonable rates, and nor would it require an implied term that the lender’s rates would move in line with the general market. All that the CA was prepared to imply was a term that the lender would not set rates of interest unreasonably, in the limited sense of not setting rates that ‘no reasonable lender, acting reasonably’ would do. In essence, unless expressly agreed otherwise with the borrower, a lender can conduct its business in what it genuinely believes to be its own best commercial interests. 



However, it is worth noting that at the time of the Paragon litigation, the rules on ‘extortionate’ credit bargains in Consumer Credit Act 1974 did not apply to changes in interest rates after the loan agreement was entered into. But, we now have Consumer Credit Act 2006, which has a new concept of the ‘unfair relationship’, and that can include anything done (or not done) by the lender after the making of the agreement. Accordingly, there might possibly be mileage in arguing that a lender who fails to follow the general trend of downward interest rates is in breach of those provisions. For the authorities see article in [2008] NLJ 1508.© Practical Lawyer