Secured Variable Loan rate increase - can we argue Libor?

flossiejo · 12 October 2009 at 4:39PM

My bank have increased my secured loan by 0.50%. I know that the banks use the LIBOR to set interest rates so I thought I'd have a look to try and find out what they're basing their decisions on.
The only site of use was Bankrate (rates / interest-rates / libor.aspx) and if I'm reading this correctly, the LIBOR rate compared to last year is lower. But my payments are now higher then last year.
I don't confess to know hardly anything about LIBOR, but does anyone have an idea if a) I'm reading this website correctly, and b) can I use this information to get the bank to be more reasonable?

Rafter · 12 October 2009 at 5:52PM

flossie,

There has been a lot of misinformation about Libor and how banks use it.

Libor is set by looking at what the very biggest banks lend money to each other at and taking an average.

However, 3 month libor is currently only a little bit more than base rate - about 0.6%. If you were a saver would you accept this as a 'good rate'?

If you were lending money to someone for 10 years would you want a bit more of a return - particularly if it was a fairly risky loan, which secured loans have turned out to be in a falling house price environment and with all the misselling of payment protection insurance?

The fact is you signed up for a variable rate loan and unfortunately your bank can charge what they like, within reason. Your best bet is to try and consolidate your loan into your mortgage (if you have any equity left) or try to squeeze a bit more out of your budget or unfortunately consider selling up and moving into rented accommodation.

Good luck

R.

halifax71 · 12 October 2009 at 6:33PM

I'm not going to argue (again) about the comment that banks can do what they want.

Flossie - you need to look at your terms and conditions and see what if any constraints there are. If like me it's a FirstPlus loan come and seek advice at www.FirstPlusComplaints.co.uk

This is a major issue as banks are increasing (in real terms) their rates due to losses in PPI income. In my case the banks lending costs have decreased by 80% but they've increased rates by 20%. They have done this to sustain their business. No other reason.

The big issue is now this gap exists when BoE / LiBOR / FHBR increase so will your rates. They wil need to maintain the gap.

You need to do plenty of research and start looking at what you've agreed to, and see if it breaches the Unfair Terms in Consumer Contract Regulations 1999. You then need to challenge your bank then start complaining to the regulators (in this case its the Office of Fair Trading), when your bank give a final response telling you "yes, we can do what we want".

Secured Variable Loan rate increase - can we argue Libor?

Comments

Categories

Get our FREE Weekly email full of deals & guides - and it’s spam-free