Tracker mortgage rates might not drop. Fight back against restrictive 'collars'.

My Abbey mortgage is also Base +.49%. I haven't checked my terms but I'm sure they're the same as yours. I didn't see any decrease in my payment last month and am waiting for this month's payment to see it kick in. The sneaky !!!!!!s! What's the point of a tracker which doesn't track down?!!

I spoke to Halifax yesterday and was told they still have the power to impose this collar ( and they could in theory apply it even if no further cut) - albeit IO doubt they will go into battle over this

And I've just found from the Nationwide site:

Tracker Mortgages
From 1 January 2009 all Nationwide tracker mortgage customers will benefit from a 1% reduction in their mortgage interest payments. Nationwide's rate cut matches the recent cut to the Bank of England base rate. In order to help mortgage customers in the current financial environment Nationwide has decided it will waive the condition which state that some tracker mortgage customers would not see further rate reductions once the Bank of England base rate falls to 2.75% or below. Nationwide believes its decision to help customers by not enforcing this clause is a further example of how, as a building society, we can be fair and offer good value to members.

Hurrah!

Duder

curriej99 wrote: »

We have a tracker mortgage with Abbey and the 'tracking differential' is set at 0.49% - I have inspected my conditions and found this (clears throat)-

13.6 We may increase or reduce the tracking differential at any time when the base rate is less than 3.00%. We will give you not less than 30 days' written notice of any change under this paragraph which increases the tracking rate and not less than seven days' notice of any change which reduces it.

Then, in footnotes..

Condition 13.6 gives us power to change tracking differential, but the power only applies if, and so long as base rate is below 3%. Please note that, if the power applies, it will enable us to change the tracking differential by more than is needed to compensate for the reduction in the base rate to less than 3%. In addition, a change to he tracking differential may continue to apply even if a later increase in the base rate takes it back to 3% or more.

This appears to me to be neither a collar nor a Minimum Rate. Does it mean that, now interest rates have fallen to below 3%, that they can increase their tracker rate by whatever they want? If so, then I could end up worse off than before the recent rate drop.
In theory they could up their tracker rate by 5% and still be within the law.
Anyone got any ideas about this one?

The footnote is just an explanation of what condition 13.6 allows Abbey to do. If I were an Abbey borrower, I'd find it worrying. It means that Abbey could now increase the tracking margin to whatever they like, and leave it there even if base rates go back above 3%.

Two ways that this might be challenged:

• Regardless of what this clause says, Abbey has to treat customers fairly (TCF) under FSA rules. If they were to make unfair use of this clause, for example to push up their profit margins, there could be grounds for complaint.
• A clause which gives the bank this much discretion might be unfair in itself, under consumer contract law (I'm not a lawyer). This would be a much harder route than TCF -- it means going to court, rather than through a complaints process. But a successful case could result in the clause being struck out entirely.

Regards

Martin, can you please take a look at what I believe may be the next big Tracker issue.

Some of us, myself included, have trackers which track the lender's own bank rates, which have traditionally always tracked the Bank of England base rate. I, like many others, have a tracker mortgage with the Woolwich and it tracks the BBBR. The Woolwich's own mortgage glossary today states:

"Barclays Bank Base Rate
Barclays Bank Base Rate follows the Bank of England Base Rate, which can go up or down and is announced by the Bank of England's Monetary Policy Committee every month."

My broker assured me when I took out my mortgage in July my tracker would track the BofE Base Rate. I have discovered that the Woolwich Intermediaries website says to Brokers (and is still saying today):

How can I re-assure my customer that Barclays Bank Base Rate (BBBR) will not be different from the Bank of England base rate?

Barclays Bank Base Rate records go back to 1932 when it was 2%. Since the Bank of England was granted independence in 1997 the BBBR has been exactly the same every day and ignoring a few historic timing differences, BBBR has always followed the Bank of England official rate, although strictly speaking it is an independent rate.

So really there is no need for concern is there? Except now, after last week's rate cut, Barclays have added a sneaky little note on their website that:

"Barclays Bank Base Rate typically follows the Bank of England Base Rate but it is not guaranteed to do so. The Bank of England Base Rate can go up or down and is announced by the Bank of England's Monetary Policy Committee every month."

Several posters to these boards have contacted the Woolwich and have been told that there is no guaranteed that future rate cuts will be passed on.

When I was looking for a mortgage I researched the FSA's own website, www.moneymadeclear.co.uk where the definition of a Tracker mortgage is:

"A variable rate loan with an interest rate that's at a set amount above or below the Bank of England or some other base rate, set independently from the lender. It tracks (moves up or down with) that rate."

Note the word "independently". Surely that is the whole point of having a tracker mortgage so that you are not at your lender's mercy to pass rate cuts on, otherwise we might as well all be on a standard variable rate!

Of course, Woolwich/Barclays may continue to pass on all rate cuts - they have done so to date. However, there is an awful lot of confusion around this issue and Woolwich/Barclays are not being fair to their customers giving out such conflicting information.

I believe there may be other banks with Trackers that track their own base rates. There was a lady posting last night that has a tracker with Scottish Widows and they haven't yet decided whether to pass the rate on.

Foreversummer