The result means that 6,000 borrowers will receive a refund.
Despite the fact that tracker mortgages are supposed to rise and fall in line with a central interest rates, such as the Bank of England's Bank Rate, West Bromwich had argued that smallprint in its contracts entitled it to raise rates even when the Bank Rate was stable.
It rationalised that its savers had been hard hit by low rates, and wanted to redress the balance by raising rates by 2%.
West Bromwich Building Society issued a statement, quoted by the Telegraph:
"We are disappointed with the judgement handed down today.That's very noble, but did the building society pass on the full benefits of the 2% rise to its savers?
This judgement relates to the decision taken in 2013 to vary the interest rate margin charged in line with the terms and conditions of their buy-to-let mortgages.
Savers, who represent the vast majority of the Society’s members, have suffered a dramatic fall in income due to lower interest rates. The Board of the Society therefore acted in accordance with its overarching duties to treat customers fairly and to act in the best interests of members as a whole, savers as well as borrowers."