MSE News: Mortgage blow as building society hikes SVR

MarkyMarkD wrote: »

You raised the example of EL, but don't seem to have checked what argument they were actually using. I don't recall any mention of them having an exceptional circumstances clause.

That would have been a better way of putting it...

MarkyMarkD wrote: »

I really cannot believe, Sarah, that you have got as far as you have with your campaign, including supposedly getting expert legal advice, without actually looking at a Skipton KFI. How on earth have your legal advisers told you that what Skipton is doing is unenforceable, without looking at the KFI.

As far in my campaign? I've only be at this part time since last week... so it's early days. I've read my own KFI, and my solicitor has the full copies of everything. I just don't have it to hand...Also, I don't think the case rests on what was in the KFI unless of course it specifically mentioned a floor for the base rate. I just think it is another agreement if they don't mention the floor

MarkyMarkD wrote: »

Whether or not that term is enforceable is what Sarah and I have been discussing - not whether lenders can simply add terms to their mortgage contracts after the fact - although Sarah would probably claim that the original term was unenforceable because it was too vague, and that Skipton have added specific interpretations of the exceptional circumstances clauses which mean they have effectively added terms to the contract.

What do you think a judge would say?

The KFI is the essential part of a mortgage contract. The FSA have expressed the view that any material term not contained in the KFI doesn't count. So I do believe it's crucial whether it's in the KFI or not. ("It" being the exceptional circs clause, not a specific reference to a base rate floor because we all know that isn't in there).

I suspect, Sarah, that you know what I think a judge would say - that the exceptional circumstances clause is a term of the contract, and that the current circumstances are exceptional. Obviously we agree to differ on both of those points.

de1amo - lenders broke the SVR cartel about 20 years ago. At present, SVRs vary between 2.5% (Nationwide's original one, and LTSB/C&G's current one) to 6.45% (Chesham Building Society) - and of course many even higher ones from the sub-prime lenders.

How can you suggest that is "resisting the breaking of ranks"? Each lender has set its SVR according to its own circumstances - exactly as they are intended to be able to do, under the definition of a "standard variable rate".

Our disagreement is based on my view that the exceptional circumstances clause is a term of the contract, and yours (as also mistakenly expressed by some of the media) that the application of the exceptional circumstances clause by Skipton represents "ripping up the contract".

I like this bit off the skipton website published under the two skipton defined 'exceptional circumstances' and I quote:
'We have promised to track the performance of these two tests and advise when they no longer prevail. When this happens, we will voluntarily reinstate the ceiling for customers who had the benefit of it under their mortgage terms, provided no other exceptional circumstances have arisen in the meantime.'
Its nice of them to offer to voluntarily abide by the terms of their contract.
That is of course providing they have not defined any other exceptional circumstances.
The next definition will be that the BOE rate of above 2.7% is exceptional unless of course it is below 2.7% as that is also exceptional.
I don't think for one minute the 'guarantee' is returning, ever. Not voluntarily anyhow.

sarahbennett wrote: »

Hi Mark, agree the SVR issue does strengthen the case but don't believe it rests on it. One has to wonder why it is such a widely held view Skipton ripped up its contract... I think people who bought these contracts felt cheated because of the repeated use of the word guarantee, and because the very thing the SVR was supposed to track was then cited back as an exceptional circumstance. This was unexpected for most people...

It is a widely held view that Skipton ripped up its contract, because journalists write what sells newspapers and don't research stories properly.

I understand that you see the use of the low BBR as a reason for invoking the exceptional circs clause as circular, but as you have posted previously, any sort of exceptional circs which were merely due to Skipton's bad management would not be acceptable under case law. The only sort of exceptional circs which would appear to me to be acceptable, would be ones generic to the whole industry - which is exactly what the present exceptional circumstances are. There is no mortgage lender who is not suffering exceptionally as a result of the low level of base rates; and almost all base-rate linked mortgages are loss-making for the lender which is an exceptional circumstance which wouldn't have been expected and hasn't happened before.

I'm sorry, but even if Skipton had included a clause saying "if our average cost of funds becomes higher than the guaranteed SVR level, the guarantee will cease to exist" you'd still be complaining that it was unfair. Wouldn't you?