Secured Loans & Variable Interest Rates

daxus

I am getting concerned with First Plus and their approach to their interest rate. I appreciate that the loans are variable, but surely that variance should have some relationship with the financial markets.

Consider the following

1. First Plus are no longer lending to new customers and therefore have no need to have an competitive interest rate, or even one that has any bearing on the current market.

2. They know that it is very difficult in the current market to move a second-charge loan.

Why don't they simply keep upping their rate to, say, 20% or even higher. What is there to stop them? They could even do it over time just to avoid attention. What possible comeback would we have? If we don't pay our payments we can lose our homes. Is this scenario actually possible? Is there really no regulation of secured loans to protect people from this type of situation?

I have a mortgage with Mortgage Express at 3.49%. I have a secured loan with First Plus at 10%. When I took them out a few years ago I believe that there was less than a 2% difference. It's not right.

halifax71

I appreciate where you’re coming from Clapton but isn’t this the basis of mis-selling? Surely to blindly accept your argument of referring to the T&C would have resulted in PPI claims being unsuccessful. In my opinion FP should have made it clear that over the coming years: -

• my payments could increase for any reason they choose
• they would not be obliged to explain why

In its simplistic form FP loaned me money at 8.4% APR when the BoE rate was 4.5% and LiBOR was 4.59%. I was not subject to any low start up rate.

My rate is now 10% and the BoE rate is 3% and LiBOR 4.42%. As a minimum I expect an alignment back to 8.4%. Why? Because that’s what it was when I took the loan out. My thinking is Banks loan on the following basis: -

Cost of raising money – i.e. LiBOR. As stated above this would result in my interest rate reverting back to 8.4%

Demand for profit from the shareholders – has this changed since they sold me the loan? It was profitable then and it would be now at 8.4%.

Risk of bad debt. My situation is still the same. In fact I should be better in there eyes as I’ve never missed a payment. Maybe I’m paying for the others?

What price customers are prepared to pay. I’ve already bought and now they want more money and I must pay.

Likelihood of losing good business. Not relevant now as it’s closed for new business.

What I want to know is what’s stopping them increasing the rate further?

Reddh_Legend

Nothing will stop them doing what they like, their ts and cs imply this and whilst everyone can be clever with hindsight, I feel they did have a duty to explain the term "variable" when that is different to simply "increasing". Settlement terms make it impossible to remortgage and in the current climate so do the LTVS so they know people, on the whole, are stuck.

Of course they would not be daft enough to have an illegal term in their agreement but with the growing weight of evidence out there, it also does not indicate that the term could be construed as "fair" also.

They will have no interest in moral position, they exist for shareholder return and with no new business coming on front end, the book could easily appear delinquent if arrears numbers start to rise, PPI issues create problems etc which would leave them more than open to keep their rates on an upward climb as their ts and cs clearly allow this. They can do what they like but I am determined to question the position and I see no reason why others should not either. My loan was taken out at 9.4 apr and is now at 12.1 apr. SHow me any interest rate measure you like that today stands some 30% higher than it did in 2005. Every time my payment has gone up the letter has read "due to the recent change in BoE base rate your APR has increased to..."

When asked to provide me with the mechanism behind my rate calculation...nothing

jonesMUFCforever

To OP - you have no claim - don't waste a stamp you are wasting your time.

To go with First Plus in the first instance indicate sub prime borrowing to me - the only way to get out of this is to repay what you owe.

halifax71

To go with First Plus in the first instance indicate sub prime borrowing to me - the only way to get out of this is to repay what you owe. Thanks for that

The thing is i would happily pay the "agreed" amount - however that amount has increased despite lower bank lending rates. That is the point that wasn't explained at the point of sale. They are taking advantage of the deteriorating LTV rates, safe in the knowledge that people can't shift the loan, making significantly more profit than was first expected.

Anyone who tries to defend such activity is a moron - and i include you in that statement MUFC :mad:

Hopefully i'll be able to shift the loan soon as i'm not in negative equity (yet), however others maybe stuck.

Now i am going to follow Reddh Legend's example and write to FP and then take it further - and i would urge others to do the same. Be warned that once interest rates go up in the next 2-5 years that all of a sudden bank lending rates will be the basis of the FP SVR and we'll all be in trouble.

Welshdresser

Hi everyone, I am in the same position as you all with firstplus and have opened threads on various other websites looking for other firstplus customers - then I found this one!!

Firstplus say the interest isn;t linkes to BoE base rate, but its funny how they have steadily increased rates over the last two years in line with base rate increases, but now the rate has dropped, our loans haven't. I have written to them stating they are not treating customers fairly.

Perhaps we should all band together and try a group approach. Surely many voices are louder than our individual ones. We can threaten to contact the FSA/Ombudsman (whatever) if they won't budge. Anyone interested??
Aly

seanj_3

I took out a loan with Firstplus in January of this year and i am beginning to regret it already, it is on the top of my new year resolutions to move it next year, as they are only out to shaft us all.
But whilst i was looking at all the post above i noticed that with halifax71, Firstplus had raised your rates in Feb 08 then lowered them in Apr 08 and then again raised them in sep 08! how can they raise and lower them for certain customers? it blows away anything that they say about them being linked to LIBOR or anything else for that mater! so if i was Halifax71 or anyone else that has had a rate increase this year to get in touch with Firstplus to find out they only increase for certain people!

CHR15

Although I sympathise, I simply can't see what there is to achieve by all this.

The Rate was advertised as Variable. Purely and simply variable, nothing to mention tracking BoE rates, Libor etc. just variable.

They could reduce the APR to 1% if they wanted to......... but this is First Plus we are talking about.
Martin Lewis has been waging war on these people for years for using popular personalities to advertise these scam loans.

Of course they were never going to reduce the APR, they are in business to fleece struggling people, by signing the t&c's the customers have willingly accepted repaying their loans at ANY interest rate First Plus decide to implement.

Like I said, I do sympathise, but taking a loan out with those clowns should have put you on the straight and narrow, enabling you to rebuild credit files etc.

Assuming the First Plus money was used wisely, you should be in a decent position to get a more regular, sensible loan to clear this one off and put it down to experience.

Good luck whatever you do

sbillingham

My son has the same problem with interest rate problem with regards to a secured loan from GE Finance. But he has now been contacted by a company www.moneyaidltd.com who say that they can get the loan written off on the basis of it being mis-sold. But there is an upfront fee to pay £230 but if their solicitors cannot find anything the original contract, £190 is refunded. Has anyone else heard of this?

Welshdresser

CHR15 wrote: »

Although I sympathise, I simply can't see what there is to achieve by all this.

The Rate was advertised as Variable. Purely and simply variable, nothing to mention tracking BoE rates, Libor etc. just variable.

They could reduce the APR to 1% if they wanted to......... but this is First Plus we are talking about.
Martin Lewis has been waging war on these people for years for using popular personalities to advertise these scam loans.

Of course they were never going to reduce the APR, they are in business to fleece struggling people, by signing the t&c's the customers have willingly accepted repaying their loans at ANY interest rate First Plus decide to implement.

Like I said, I do sympathise, but taking a loan out with those clowns should have put you on the straight and narrow, enabling you to rebuild credit files etc.

Assuming the First Plus money was used wisely, you should be in a decent position to get a more regular, sensible loan to clear this one off and put it down to experience.

Good luck whatever you do

I see your point but if you don't ask you don't get.

I'm not struggling to repay the loan but it's the principle - in the current climate all lenders are being urged by the government to cut the cost of borrowing and help those who are struggling. FP are refusing to do this and they need to justify this to customers and any regulatory bodies. The more fuss we kick up, the more pressure we put on them to review this. They may be legaly entitled to charge what they want but that doesn't justify their stance.