One Account rates cut

gnuiq

Hi -

A bit of a crosspost sorry (from the fool), but this seems like a prime board for the One Account.

I haven't seen a full list of the One Account rates versus the BBR (for a 50-75% LTV), so thought I would add it. Note (Est in 1991 to 2001 assumes the rates were passed on immediately, not far off I think).

Date / change /BBR / How rate treated / OA% / Margin
10/Dec/88 -0.50 6.25% passed on 7.45% 1.20%
7/Jan/99 -0.25 6.00% passed on 7.20% 1.20%
4/Feb/99 -0.50 5.50% passed on 6.70% 1.20%
8/Apr/99 -0.25 5.25% passed (Est) 6.45% 1.20%
10/Jun/99 -0.25 5.00% passed (Est) 6.20% 1.20%
8/Sep/99 0.25 5.25% passed (Est) 6.45% 1.20%
4/Nov/99 0.25 5.50% passed (Est) 6.70% 1.20%
14/Jan/00 0.25 5.75% passed (Est) 6.95% 1.20%
10/Feb/00 0.25 6.00% passed (Est) 7.20% 1.20%
8/Feb/01 -0.25 5.75% passed (Est) 6.95% 1.20%
5/Apr/01 -0.25 5.50% passed (Est) 6.70% 1.20%
10/May/01 -0.25 5.25% passed (Est) 6.45% 1.20%
2/Aug/01 -0.25 5.00% passed (Est) 6.20% 1.20%
19/Sep/01 -0.25 4.75% passed (Est) 5.95% 1.20%
3/Oct/01 -0.25 4.50% passed (Est) 5.70% 1.20%
8/Nov/01 -0.50 4.00% passed (Est) 5.20% 1.20%
6/Feb/03 -0.25 3.75% passed on 4.95% 1.20%
10/Jul/03 -0.25 3.50% passed on 4.70% 1.20%
16/Nov/03 0.25 3.75% passed on 4.95% 1.20%
5/Feb/04 0.25 4.00% passed on 5.20% 1.20%
6/May/04 0.25 4.25% passed on 5.45% 1.20%
10/Jun/04 0.25 4.50% passed on 5.70% 1.20%
5/Aug/04 0.25 4.75% passed on 5.95% 1.20%
4/Aug/05 -0.25 4.50% no ……………. 5.95% 1.45%
1/Sep/05 0.00 4.50% decrease 0.25 5.70% 1.20%
3/Aug/06 0.25 4.75% passed on 5.95% 1.20%
9/Nov/06 0.25 5.00% passed on 6.20% 1.20%
11/Jan/07 0.25 5.25% passed on 6.45% 1.20%
19/May/07 0.25 5.50% passed on 6.70% 1.20%
5/Jul/07 0.25 5.75% passed on 6.95% 1.20%
6/Dec/07 -0.25 5.50% passed on 6.70% 1.20%
7/Feb/08 -0.25 5.25% passed on 6.45% 1.20%
10/Apr/08 -0.25 5.00% no ……………. 6.45% 1.45%
7/Jul/08 0.00 5.00% increase 0.5 6.70% 1.70%
8/Oct/08 -0.50 4.50% no ……………. 6.70% 2.20%
3/Nov/08 0.00 4.50% decrease 0.5 6.20% 1.70%
6/Nov/08 -1.50 3.00% no ……………. 6.20% 3.20%
1/Dec/08 0.00 3.00% decrease 1.0 5.20% 2.20%
4/Dec/08 -1.00 2.00% no ……………. 5.20% 3.20%
31/Dec/08 0.00 2.00% decrease 1.0 4.20% 2.20%
8/Jan/09 -0.50 1.50% no ……………. 4.20% 2.70%
2/Feb/09 0.00 1.50% decrease 0.2 4.00% 2.50%
5/Feb/09 -0.50 1.00% no ……………. 4.00% 3.00%
5/Mar/09 -0.50 0.50% no ……………. 4.00% 3.50%
1/Apr/09 0.00 0.50% decrease 0.25 3.75% 3.25%
7/May/09 0.00 0.50% n/a ……………. 3.75% 3.25%

This is my first posting, prompted in part by the "reviews" now happening at the one account.

It does show the margin over BBR has widened by 2.05% (ie from 1.2% to 3.25%)

However I'm less worried about the level of the interest rate (I do think that at very low BBRates, low liquidity the bank's margins are stretched and some widening of the interest could (should?) occur. The best rates available now seem to be BBR + 2.4%.

But I do think this sort of thing needs to be agreed up front, not least to provide some rationality/certainty to customers. I also think that there needs to be a consistency in the timing of any rate changes.

I would much prefer a formula for the base rate something like:
Account Rate = BBR + 1.2% + MarginAdj
where MarginAdj only occurs if the BBR < 5% and MarginAdj = (5-BBR) * 0.4%

This is effectively what RBS are doing at the moment, and I guess says that below base rates of 5% only 60% of any reductions would be passed over. (Which is perhaps not unreasonable in difficult economy, tight liquidity - I never felt the BBR to mortgage ratio was a linear relationship).

But I emphasize - I don't think the One Account should start imposing arbitrary decisions on their customers. It not only annoys us but ruins their reputation. They are being squeezed on profitability but they should address the issue head-on and give clear, reasoned and predictable responses to it.

They should also think about being a bit more proactive rather than reactive. But I suspect they are no longer an organisation to innovate.

Has many others been reviewed? I've seen a few other posts to indicate this is the case. I said no to a facility haircut. Do you think the "reviewers" are long-term One Account employees, or newly hired "troubleshooters"? I don't like their modus operandi.

And I wasn't aware that the tiered interest rates had been discontinued (or concertina'd). Cheers for that.

Gnuiq

musicegbdf

red789 wrote: »

Heard from the FO today. They cannot pursue the case yet becuase OA have not explicitiy said that we are at deadlock.

For others considering doing the same, you need to make sure that the letter from OA is worded correctly, which is to not say something helpful like - "However, if you wish to discuss this matter further with me".

As a bonus it should add by law, in the last paragraph, "you may refer this matter to the FO".

So, Ive requested all that from the OA. On we grind! Nice weather we are having though.

Had a few holding letters from the FO , but no real response either way yet. Perhaps they a dragging it along and then will send me something similar. The good news is my personal situation is now that I am able to move and have and I have 60% equity so only need 40% , but as I am 52 only really want 10 years , so am now watching when the best Fixed 5 year deal comes up , if I could get 3.75% I would jump provided the "fees" aren't too bad. Best I've seen was 3.99%.

gnuiq

Hi again -

Apologies for a cross post from the Fool but this is just a data table I did showing the OA interest rate, the bank base rate, and the Libor rate. At the very least feel free to use any info in it.

http: //boards.fool.co.uk/Message.asp?mid=11541220&sort=postdate

I am also worried about the One Account interest rates - not so much in relation to be bank base rate (even if there has been some suggestion there was a linkage, they do have a 30-day change of terms clause). Also it did seem understandable for a while in 2008 that the One Account would have to break away from the base rate (in line with weird market conditions, albeit of the banking industries own making).

But I was nonetheless trying to work out what the linkage of the variable rate was to the markets. As people have noted its not linked to the BBR, its no longer Libor, it something else.

So I rang Virgin One and ended up speaking to a CSR, then someone else, then one of the managers of the teams. They are all very nice but its fairly obvious that interest rates are now imposed at RBS board level and, few, if any of the One Account staff are involved in that.

Anyhow my question was "what is your interest rate policy?". They tried to fob me off with well it's a variable interest rate so the interest rate, is well, variable. (No !!!! sherlock, but what's the policy for setting the variable rate).

Finally the manager gave me these three answers:

:cool: the OA still worried about the uncertainty in the market and specifically in relation to the housing market with higher default rates (...hence the widening of the interest rate in respect to libor)
:mad: the OA (as part of RBS) has to set rates which is balance with their depositors (I think this is a load of crap, we're subsidising the interest RBS depositors receive). I think more likely is that they are merely maximising profits from the mortgage holders
:eek: our interest rate is competitive in the market (this comment worries me the most as it means the One Account can use the competition of the market to raise rates instantaneously there are any fluctuations, but can delay any reduction until all other competitors have done so). In other words far from being a market leader (which I bought into all those years ago) the product is now a market follower.

I don't know how it's going to pan out. If I could swap easily I would go for something like first direct where at least there's a degree of clarity.

Anyhow all I ask, to all the virgin one customers is next time you ring them ask "What is your interest rate policy?". And don't accept "its variable". Ask for a clear policy else we will remain over a barrel.

Cheers
Gnuiq

NB As of today 15th May Libor rate is 1.356% which means the interest margin of the one account has widened by 1.30% (in relation to Libor) than its historical average over the period 1998-2008. Or in other words, even after allowing for the fluctuations in their cost of funding, RBS is making an additonal £1300 pa per £100k drawn mortgage per customer.

halifax71

Nice money making scheme for the banks this. You say that RBS is making an additional £1300 p/a per £100k well with my secured loan with Barclays they are making an additional £3800 p/a using the same methodology. Same issue - manipulation of variable APR.

Hopefully the FOS / OFT will deem this unfair under the UTCCR 99 soon. There's enough complaints pending.

figgles

Thanks gnuiq for that break down of rates, I've been looking for something like that for a while.

I've had a OA since 1999 and was in the fortunate position of paying off my mortgage a few years later, but the month I did so my sister got divorced so I bought a share of her house in London and ended up with a mortgage again (although in the good position of owning 1 1/3 properties with a mortgage for about 25% of the total value of my ownership by that time).

While the OA does seem slightly more expensive, I've used it to as best effect as I can (ALL money goes into it) and it's done me very well over the years (see above!). I'm now being possibly stupid by buying a larger property while the market is so bad (got just under 25% discount on the new house!!!) and staying with the OA.

I must admit I'm a bit worried about the Libor/OA rate difference, however I can't see them sticking at the current difference forever because it would be suicide for them, maybe they would go up .1% or .15% if the rate increased by .25% until the margin returned to the earlier levels. Who knows, as the Libor rate keeps coming down, maybe we'll see a .25% cut coming through if the base rate doesnt change but the libor/base shrinks.

Fingers crossed however, common sense will prevail with OA rate setters!

karanda

A quick update: I have received a holding letter from the Financial Ombudsman recently telling me they are still investigating my case and will keep me updated. It has been a long, slow haul, but at least they seem to be taking our collective complaint about mis-selling seriously. It is getting on for a year now since I initiated my complaints procedure with RBS.

3dfan

I also want to say thanks gnuiq for break down of rates, very useful info for my business...:T

musicegbdf

karanda wrote: »

A quick update: I have received a holding letter from the Financial Ombudsman recently telling me they are still investigating my case and will keep me updated. It has been a long, slow haul, but at least they seem to be taking our collective complaint about mis-selling seriously. It is getting on for a year now since I initiated my complaints procedure with RBS.

ME too am on my third holding letter now. My MP seems to have lost interest ( I wonder why!), seems they are working on that basis we will all just lose interest (sorry about the pun here) and go away...:mad:

gnuiq

Cheers figgles and 3dfan

figgles

I agree - its been a great product, great customer service. As with you I'm not that worried about the actual rate today - more that I want to use my account in the future. But the uncertainty is a bit annoying. In the past you could just leave the One Account to do its thing - now you seem to have to keep an eye on it. With a lack of transparency on the interest rates, trickle down decisions (from RBS), and a few condescending customer service people starting to appear - it becomes a standard high-street (high-stress) banking. And I bet you that RBS is itching to make further changes (or charges?).

Per selftrade, GBP 3-month libor is now 1.25%, and so the margin between this and the One Account Rate is now at a record 2.5% (for most of the previous 10 years has been 1.09%).

Of course you could argue I should be comparing apples with apples - and looking at the cost of long term funding. (If I get time I will, eg cv to 5-year swap rates). It will be interesting to see if the One Account increases its interest rate next week in relation to the cost of longer term bank funding.

Whatever the case - some clarity from The One Account as to how they set their interest rate is essential. Or should I say clarity from a mid-manager from RBS (as I suspect the RBS board rubber stamp other people's decisions).

3dfan

Cheers, but please go to:
http: //boards.fool.co.uk/Message.asp?mid=11541220&sort=postdate

(NB remove space between : and / in above) and in belwo you will find links to sources for bank base rates, GB 3-month libor

Gnu

karanda

A quick updated - received a letter from the Financial Ombudsman Service this week again apologising for the delay in assessment of my complaint.

They go on to say: "the particular issues in question are ones that this service is considering on a wider basis - that is the Ombudsman is looking at the common features of this case and a number of similar cases prior to coming to any findings."

It seems to be taking forever, but at least the issue of dishonest mis-selling and lack of transparency by RBS seems to being taken seriously and investigated thoroughly.

Will post updates as and when.....