Nationwide tracker and I am sure there is no collar

bright_15

has214 wrote: »

if mortgage collars are just the way of the world, and if all borrowers on trackers facing collars insisted that they should not be invoked then the government would put pressure on the banks or sanction the corresponding winfall tax or something....then I guess that would also be just how things are...hey?it works both ways

This is the issue with the finicial situation we have at the moment 'cause and effect' as one issue is resolved, we hit another issue, nobody anticipated...

Like the banks not lending to customers, making balance sheets look better....

lisyloo

needafilip wrote: »

Lisyloo, interested in your comment:

'I have no doubt that they will take up their right to vary your terms and conditions giving you the appropraite notice period,'

Does this mean that the terms and conditions of any mortgage can in theory be changed with the required notice period? :mad:

So all this worrying about whether your mortgage has a collar or not is academic because they have carte blache to change the terms anyway?

Yes, you've got it.

If so what is the notice period they have to give?

Would appreciate the help.

You need to look in your terms and conditions or ring your lender for the timescale but personally I wouldn't worry about it.
Theoretically it's possible to get run over by a bus or struck by lightening but the chances are millions to one so I think we are getting in the realms of negligeable risk.

MarkyMarkD

Prior to mortgage regulation (October 2004) KFIs were not issued.

I agree with those who state that KFIs should refer to any cap or collar.

But prior to October 2004, lenders would likely have included this sort of wording in the mortgage deed, not the offer document. The mortgage deed would have been issued to your solicitor and he should have pointed out the terms relating to the collar.

If he didn't, your claim is against him for negligence, not against the lender for unreasonableness.

There is nothing immoral about a collar. Suggestions that it is immoral are simply stupid.

If you are a lender who gets most of its money from savers, you have to give them a return they will find acceptable. And you have to pay your staff, and absorb bad debts, and all sorts of things.

It's simply not possible to do this if you are lending people money at (say) 1.5% if they are on a BBR+0.5% tracker. No lender doing that is making a bean.


Regarding earlier comments re A&L, they definitely do not have any collars. Most lenders do not. The ones which do have been well-publicised and Halifax and Nationwide are the most notable.

The fact that Halifax have been saying that they "may not enforce" the collar makes it sound mighty like they realise their documentation is a bit dodgy.


Lisyloo's (normally quite sensible) comments about lenders having "carte blanche" to change the terms of your mortgage are simply rubbish. Mortgages are a legally enforceable contract and the lender cannot vary the terms of that agreement without your consent - unless the agreement already provides terms for them to do so. And most mortgage contracts do not.

surreysaver

After reading this thread, I checked my Abbey National paperwork for my 0.75% above BoE traker, and my mortgage interest rate cannot be lower than - wait for it - 0.0001%!

needafilip

When I asked an IFA to get clarification from Halifax on their policy with mortgage collars he got the following response. They do intend to introduce a rate floor of 3%, therefore if for example you had a tracker with BoE base rate plus 0.8% the minimum it would track the BoE base rate to would be 2.2%. This seems to contradict what is written in their terms and conditions which indicates that when the BoE base rate falls below 3% they can alter the terms of your mortgage and change the tracker margin i.e. with the above product they could in effect retain a floor of 3.8%.
This could indicate a number of possibilities, Halifax know they have floored contracts and are going to try to introduce these collars on an individual basis and hope not to much fuss is generated, or it could be that they are just incompetent and are not aware of the implications of the way in which they have tried to hide these collars?
On the point raised about lenders not being able to pass on cuts in base rates all the way down to 1.5%, I don't follow the logic. So long as the margin remains the same then the profit remains the same, you can guarantee they will cut savings rates in line with base rates, money generally becomes a lot cheaper. Any loss on the tracker products is offset by gains on fixed rates. Don't forget most lenders make long term loans using short term finance. Gosh I hope that short term finance doesn't disappear, else we might see financial collapse followed by a depression. What it already has, damn.

MarkyMarkD

Your point about margins is wrong.

The issue is twofold:

(1) financial institutions need to make a margin. If their mortgage rates are (say) 1% then they cannot possibly make an acceptable margin to cover their costs, and some profit, and some bad debts, and pay anything like an acceptable return to savers; and
(2) aside from the best buy savings accounts which obviously all MSE's have their money in, there are lots of rubbish savings accounts paying rates around (say) 1%. Pretty obviously the rates on these cannot track BBR down for very much longer - indeed, many such accounts have already had to be reduced less than BBR in recent times.

So, overall, financial institutions cannot reduce their cost of funds in line with BBR as BBR goes down beyond a certain level. Which is precisely why the more prudent ones included a floor in their mortgage contracts.

needafilip

I am sorry but my opinion is that you are wrong.
The aspect you do not address is the fact that as interest rates fall especially when they fall rapidly the margins that lenders make on fixed rates increases (lenders lend long term but borrow short term). Therefore the overall net effect of having to take a hit on trackers but making on fixed interest should make this a zero sum game. 'Prudent' lenders (quite frankly a risible statement considering the current situation) should have calculated their margins and profitability when they issue each product for any given scenario. Your argument does not explain how some lenders can track BBR all the way down and not others, are you suggesting these lenders are being charitable?
I have no issue with lenders having collars and caps on their products, so long as they are clearly described and transparent in the illustartions they provide to customers in the KFI (which is a regulation of the FSA). My specific problem is with the way in which Halifax try to hide this information by not describing a specific 'floor' rate in their KFIs or Offer documentation. I am not the only person who believes this and would expect this to be the judgement of any reasonable person. I for one will be fighting this all the way to make sure Halifax honour their contractual obligations.

pebblespop

i have a nationwide tracker and my last rate notification stated my collar was 2.68%

i am at 2.97% at the moment so can squeeze one last rate decrease out of them!

needafilip

I have an update from my IFA friend on the Halifax situation re mortgage collars.
The previous info. he got about the 'floor' rate being 3% was wrong, he got this info. from the mortgage intermediary he uses. When he spoke to Halifax direct they said that they DO intend to invoke their clause which will enable them to change tracker margins(the bit they add on to the base rate) when Bank of England base rate falls below 3%(probably on this Thursday).
He said that he had not been aware of the condition about tracker rates in the Halifax terms and conditions because the way they produce a KFI is done automatically using the online system of the intermediary(or direct with the lender), the KFI that is produced is uneditable by themselves. When a KFI is produced the IFA does not automatically receive a copy of the full terms and conditions, moreover when the offer documentation is sent they do not receive a copy of the full terms and conditions automatically so even at this stage they would not be aware of any 'key facts' about tracker rates that were not explicitly detailed in the KFI. Conclusion, not really the fault of the IFA for not making customers aware of the possiblity of a tracker 'floor rate' as until recently he probably would not have been aware himself.
If I haven't mentioned it before check out the FSA website and look in their handbook under MCOB 5.6.27, for me this regulation quite clearly stipulates that if a lender intends to impose a 'floor' rate then this needs to be explicitly detailed in the KFI.
http://fsahandbook.info/FSA/html/handbook/MCOB/5/6

needafilip

pebblespop,

Is your tracker product Bank of England base rate -0.03% to give your current rate of 2.97%? Seems an unusual figure.
If base rates are cut to say 2% will the minimum rate you pay interest on be 2.68%, again a strange number. Or is 2.97% the nationwide base rate? Therefore you pay this +/- your margin rate?
Most importantly was this floor rate described in the KFI you received when you took out the mortgage? What exactly did it say?
I think that Nationwide are pretty up front about any collar or cap rates they intend to impose, so I would expect this to be detailed in their KFI.
Appreciate the info.