Nationwide and Halifax seek legal advice over "collars".

foreversummer

http://www.guardian.co.uk/money/2008...ortgages-banks

Foreversummer

sympatex

No collar on my First Direct tracker, tracking at .99 above BOE. All i need now is a house...!

AHAR

I switched to a lifetime tracker deal last summer with Nationwide. The 2.75% collar was specifically pointed out to me by the advisor and is clearly stated in the paperwork I have.
I still think it's a good deal for me at BoE +0.44%.

luckyfool

payless wrote: »

they were from their own site.. but were the 3rd party sourcing system KFIs as good - I know some did not detail initial interest wonder what else they missed

Possibly, however the lender has no responsibility for the accuracy of the KFI from a 3rd party site. Unfortunately that is on the intermediary.

midflight

Someone tried to post a link to this article (above) but it didn't work for me, so here is the article in full. It was published this afternoon on The Guardian's website...

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FSA warns lenders over tracker mortgages


Banks and building societies were today warned they could find themselves in hot water if they use small print terms to avoid passing on this week's likely interest rate cut to their tracker mortgage customers.
The Financial Services Authority has waded into the row over the "collars" or "floors" that some mortgage lenders have in their terms and conditions, which allow them not to pass on rate cuts, even if the contract says the loan is tied to the Bank of England base rate.
Many holders of tracker home loans are looking forward to another sizeable reduction in their monthly costs if the Bank cuts rates on Thursday. Some economists are predicting a cut of a full percentage point, which would take the main rate down to 2%.
However, some lenders have small print in their contracts which allows them to set a minimum rate for customers.
Nationwide building society has indicated that once the base rate hits 2.75% it will not pass on any further cuts to borrowers, while Halifax has an option not to pass on any cuts below 3%, but both would be under pressure to do so. The restriction means a borrower with a Nationwide mortgage tracking 0.5% above the base rate will never see their pay rate fall below 3.25%, even if interest rates continue to fall.
Speaking today at the Council of Mortgage Lenders annual conference, Jon Pain, the FSA's retail markets managing director, said that while tracker interest rate floors could be a legitimate term of a mortgage, "it can only be if it is clear and unambiguous to the consumer, and is consistently and prominently spelt out in the initial KFI [key facts illustration] and offer document throughout the sales process".
He added: "If it is not [lenders] run the real risk of both breaching our disclosure requirements and having an unfair contract term you cannot enforce."
Pain said he was well aware of the potential risks some lenders faced in a very low interest rate environment. "But the solution cannot be to introduce contract terms that don't exist or are unenforceable," he added.
Yesterday, Nationwide launched a tracker deal with a collar of 1%, allowing new borrowers to benefit from further rate cuts. However, the rate on the mortgage is pegged 1.99% above the base rate.

-Rupert Jones

Leon_W

Thanks for that Midflight

I still predict all merry hell to break lose though !

I've not seen much venom pointed at Nationwide and from anecdotal evidence it seems that most borrowers are aware of the collar, so that is one up for the usefulness of a Key Features Illustration as long as it does fairly represent the Key Facts. If they had their day in court then I couldn't see Nationwide losing the argument.

The Halifax is a whole different kettle of fish. Many of their KFIs have no mention of a collar whatsoever (and I've seen a few in my time), so, for this particular lender, there may be trouble ahead.

Regards

brixham

Ok just dug out my mortgage offer from Nationwide from Jan 2008 ( no not a new mortgage before anyone thinks I bought this year !) and it states " A Tracker Rate which is variable and will be 0.34% above the bank of England base rate unless the base rate is 2.75% or less .....".
Now just looked at my latest letter informing me of the cut and in small letters it says it has a collared basic mortgage interest rate of 3.09 % min.
So which is it 2.75 or 3.09 and can they just change it when I signed up at 2.75 ?

AHAR

brixham wrote: »

Ok just dug out my mortgage offer from Nationwide from Jan 2008 ( no not a new mortgage before anyone thinks I bought this year !) and it states " A Tracker Rate which is variable and will be 0.34% above the bank of England base rate unless the base rate is 2.75% or less .....".
Now just looked at my latest letter informing me of the cut and in small letters it says it has a collared basic mortgage interest rate of 3.09 % min.
So which is it 2.75 or 3.09 and can they just change it when I signed up at 2.75 ?

That 3.09% minimum includes your offset.
2.75% + 0.34% = 3.09%

sheslookinhot

midflight wrote: »

So... we bail out the banks... to the tune of how many billion?... and in turn they show their eternal gratitude by refusing to track our mortgage deals below a certain % ??? That's nice. Will the government allow this to happen?

Is that what you signed up for ?

has214

The banks have a moral duty not to impose these collars on hard up mortgage payers, whether theyr'e legally enforcable or not as the blame for this crisis partially lies at their doorstep. If they decide otherwise then at least go 50/50 with mortgage payers.