Standard variable rate rip off - anything we can do?

stulka

Hi,

We have a mortgage with CHELSEA - their SVR was 6.94% when the base rate was 5%; now the base rate is 1.5% their SVR is 5.79%! They haven't passed on any of the last two rate cuts to their customers. When I've called them, I was told that they are 'reviewing the rate at the moment' - and this was two weeks ago. What a robbery!

Is there anything we can do? As per Chelsea, our house price dropped by 20K so we have 99% mortgage now - which makes it difficult to switch to other product.

Is anyone aware of any customer actions to put more pressure on banks/ government to push banks to reduce their SVR?

Any practical advice will be welcomed.

Thanks.

Robert_Sterling_3

I agree that their SVR is high.
It might be lower soon.;)

dunstonh

Chelsea have always been high on their SVR. I always put it down to the big cashbacks they have offered.

Although it is the SVR and not a BoE tracker so you shouldnt expect like for like drops.

Mithos

Unfortunately in this instance Chelsea are a building society and not a bank. They effectively only have to answer to their savers. A bank can continue to exist on negative profits a BS can not.

There is some reasoning talked about in this thread as to why their SVR might be so high.

lynnzal

Robert_Sterling wrote: »

I agree that their SVR is high.
It might be lower soon.;)

Or it might not, so thanks for the advice!

As a borrower I was suprised that my mortgage payments with CBS went up after my fixed rate finished. They now have the highest SVR and offer less than 2.5% (on average, before tax) to savers. I have written to them to express my disgust and will report back any response.
As mentioned elsewhere on this thread, they are not obliged to reduce rates in line with BoE. However, borrowers have as much say as what goes on as savers with the CBS, so members should make their voices heard.
I believe they have a large portfolio of bad debt and are trying to avoid taking on any more debt (hence high rates). Note they no longer offer buy to let mortgages directly (you have to use a subsidiary). The big risk for CBS is that existing high risk borrowers cannot get loans elsewhere so will stick with them, whereas existing low risk borrowers can ...and should move their business.

womble77

I am in the same position. My current fixed rate deal of 5.39% with Chelsea ends on 1st March when we will go on to their standard rate of 5.79%. This will add an extra £183 per month to our mortgage on an interest only rate. They have estimated that the property value has decreased by £55k in a year and a half so we now have a 98% morgage and are pretty stuck. It just seems like a complete swindle when everybody else is paying so much less now. My partner has just had our first child yesterday so there is now only going to be one full income so things will be tight.

If anybody hears of anything that could help then please let me know.

dunstonh

5.79% is still a good rate. Nearly 2% below the long term average.

It just seems like a complete swindle when everybody else is paying so much less now.

Not really. Higher risk lending is still paying more. And those that are reliant on savers still have higher SVRs.

If anybody hears of anything that could help then please let me know.

Cant really help but it may be an idea for you to look at your debt situation as it doesnt look good. Your mortgage will be 5.79%, which is lower than average but its going to be tight for you. And that is on interest only as well. You are probably in negative equity come March too. All the signs of high risk borrowing. The debt free wannabe section on this board is very good and it may be worth you seeing how you can move from being a high risk borrower to a lower risk one (better rates come with that). You may not be able to do it on day one but the sooner you start, the easier it will become.

minimacka

Im in a similar position too im with the Yorkshire Building society and despite passing some of the reductions on we are still paying 4.99% its really anoying to be paying so much. The banks seem to have a win win situation they reduce immediately the savings rate but dont pass on the reductions in the mortgage rate. :mad: , and the big fat cat bankers can still claim there big fat bonuses despite being bailed out by the government. (sorry rant over)

samsuka

I am in the same boat. I took out a mortgage in September with Chelsea on the SVR tracker, knowing that rates were going to go down, and while i didn't expect them to track the base rate exactly, i at least thought they would track them a certain extent, rather than the measly cut we have seen so far.

Absolutely furious as turned down a more expensive deal which was a base rate tracker. Have sent them 3 or 4 emails and called them up to ask what they are doing to little avail. They said its because they are helping savers, but their savings rates aren't particurarly good, so i think as others have suggested, they are just screwing the mortgage owners to make a profit to cover any other c*ck ups they have made (apparently they had exposure to Iceland).

We just need to keep the pressure up, and go onto their contact page on their website to record your discontent. Talking to the operators there are a lot of people complaining, so eventually surely they have to cut it.

Thanks

S

Hillfly

I'm with the Stroud & Swindon and they too have a very high SVR. I don't like it but the bottom line is you pays your money and takes your choice. If you choose a smaller lender then I guess there is always the risk they will be under less consumer pressure to follow the trend.
None of us were complaining when these smaller outfits offerred better deals before the market started falling!
That said it's also no exscuse for taking advantage of people in a recession. They may find the consequence is a higher number of defaults over time.

sandwichman888

The Merchant of Venice – a Tale for Our Times - Greed, Usury & Deception in The UK Mortgage Lending World


It can hardly have failed to escape anyone’s attention that a number of Mortgage Lenders have signally failed to pass on the benefits of the recent cuts in Bank of England Base Lending Rate to their existing Borrower customers whose Loans have reverted to their SVR.

Many in Government would appear to take the view that it is “up to the individual Lender or Society” to pass on the benefit of these lower rates. I beg to differ for the following reasons and I hope that the Office of Fair Trading will investigate now so that these Lenders are not allowed to get away with this behaviour.

For my part, I have a somewhat unique insight into what is happening in various sectors of today’s Housing Lending Mortgage Market as I have several Mortgages. 3 from Mortgage Express (aka Bradford & Bingley), 1 from Emex (Cheshire BS) 1 from Bank of Ireland and 1 from HSBC (a commercial property mortgage loan).

( NB None of them are so called Base Rate Tracker Mortgages and every single one of their respective instalments have been paid on their due dates. Each and every Loan is paid right up to date at the time of writing.)

I see wide variations in behaviour by different Lenders and in the case of Mortgage Express, dual standards of behaviour!!!!!!!!

Why and how has this situation been allowed to develop?

The answer to this question could be answered in several ways.

Firstly some Lenders have argued that, in order to protect their Capital Bases they need to be able to attract new funds from Savers and in order to offer attractive rates to Savers, it necessitates a higher SVR for their existing Borrowers.

If initially, we accept this premise then those Lenders failing to pass on the base Rate cuts should in theory be offering very high rates to their savings investors. This is untrue in the majority, if not all cases. Their rates are measly by comparison to the better rates on general offer to Savers. In any event those Lenders who have passed on the cuts should in theory be unable to to offer attractive Saver rates yet they are amongst those Banks and Mortgage Lenders offering Superior Savings Rates to their investors.

The second reason advanced by Lenders why rate cuts are not passed on is that the Lenders argue that, under the Terms of the Original Mortgage Offers, there is an (Implied) Term permitting the Lenders to set rates at whatever level they choose even for existing Borrowers and outside the Lender’s comparison SVR rates quoted at the time the home loans were set up.

If we accept this second premise, one is bound to ask , at the time of the Offer and Prior to acceptance, was it made perfectly clear or stated Expressly that the differential between that Lender’s SVR and the BoE base rates could widen to as much as 5.5%.?

- or perhaps even more!!!!!!!!


I doubt anybody would be convinced that any Borrower would EVER have knowingly accepted a mortgage “Fix” for 2 or 3 years in the knowledge that the SVR rate would be up to 6%, or higher, than BoE base rates when they came to the end of the “Fixed Interest Period.”

Such Terms would be unfair and be struck out by the Courts

If such Terms were hidden, or Implied Terms, it would be doubly unfair, especially if the illustrations provided at the time clearly point out a misleading SVR differential between the BoE and the Lenders currently then available SVR, of around 2%.

If this kind of – “now you see it, and it’s your own fault that you didn’t spot it at the time then -tough” – approach is tolerated, then those Lenders using this kind of sharp practice have been permitted to operate at the level of back street Loan Sharks.

The third premise is that there are a number of additional reasons why certain Lenders need to practice this Usury.

• Some Lenders want to rebuild their Asset bases quickly (damaged by their own faulty lending practices in recent years), regardless of the pressure it puts on customers. (Mortgage Express we know, lost a lot of money and now they are trying to recover at least a part of it through this back door)

• Other Lenders merely desire to strengthen their assets / incomes at the expense of DEFENCELESS existing customers (see below). This is Loan Sharking - pure and simple.**

• Other Lenders do it simply because they believe they can get away with it. MOST borrowers are ignorant because they only have one Mortgage Loan and accept with resignation that the Lender is acting within the Terms of the Mortgage Offer and that they have no redress in their own situation. Unfair Terms and Conditions Legislation must apply in such cases but most individual Mortgage Holders will be unaware of this.

Lets now review my own situation because it illustrates, in a microcosm, the differing ways in which some property Lenders are operating their SVR criteria.

Mortgage Express (a.k.a Bradford & Bingley BS)
Mortgage 1 SVR rate currently charged, reduced since October 2008 to.. 2.25%
Mortgage 2 SVR rate proposed from May 2009 at the end of current “Fix” (unacceptable) 4.84%
Mortgage 3 SVR rate proposed from Dec 2009 at the end of current “Fix” (unacceptable) 4.84%


So what is going on here?

A leaflet I recently received from Mortgage Express (see attachment) creates the impression of a “new” kind of SVR. A “PVR” – obviously a stratagem to delude hapless existing borrowers that “PVR’s” were somehow existent at the time of their original Loan offer. This piece of deceit is included because Mortgage Express is seeking to reduce it’s existing Loan Book by persuading some borrowers to pay more money into Mortgage Express’ coffers at the present time whilst concealing the correct/original SVR from other existing borrowers.

No Term in the Original Mortgage Offer mentions “PVR”s. There is as always, a warning that Interest rates could rise in the future as well as fall, but no suggestion, Implied or Express, that interest rate differentials between Society and BoE could alter at the behest (whim) of the Directors of the Building Society in question,

I have held another Mortgage Loan with Emex Building Society (A Cheshire BS subsidiary) for several years and for a long time the loan was variable and moved up, OR DOWN, as BoE was adjusted over the period. I have all the advice letters from them on file and they correlate precisely with BoE rate changes!! The differential was near enough 2%
The “Fixed Interest rate deal, which I took on about 2 years ago with the same Lender expires at the end of May 2009 and they now have the temerity to advise me that their SVR will be a sky high 5.99% That’s a differential to base of 5.49% as against 2% with all their previous Interest rate adjustments. Effectively that is a 175% increase in their Lending Charges with no legal or moral justification whatsoever.



Bradford & Bingley and Emex Uncompetitive activity in the Mortgage Loan Industry



I would like to digress slightly at this point because I wish to raise another issue – that of uncompetitive activity in the UK Mortgage Loan Industry in recent years.

It has a bearing on the Mortgage Express / Emex, nexus of home loan lending, and it involves a third party, GMAC (General Motors Acceptances) an American operator, active in the field of Sub Prime Mortgage Lending in the UK and USA in the years prior to the Credit Crunch in 2007.

In all probability it was the activities of Mortgage Express, Emex and Their Ilk that were instrumental to many of the problems we see in the UK Home Loans Debacle today.

It will be seen to be a matter of financial record that GMAC colluded with and sold very large “parcels” of mortgages to Mortgage Express and Emex, amongst others. (Bradford & Bingley have sought to distance themselves from these original offers saying they are no longer bound by the conditions therein).

GMAC I also read recently in the media, unloaded £25 BILLION pounds worth of these Loans onto British Mortgage Lenders over the pre credit crunch period.

Now surely it is more than just a coincidence that Mortgage Express and Emex – supposedly, both independent Building Societies, operated out of the same offices in Skipton -I believe they still do. Not only that but both these Lenders are closely linked to GMAC in the “Happy Times” of Mortgage Lending (when every Lender and Mortgage Broker believed they were making a killing), via a national network of Mortgage Brokers all of whom would have been in receipt of Finder/Introductory Fees in respect of Mortgage Applicants from GMAC.

Not only would it appear that some kind of collusion over marketing and interest rates went on then between the three, but Mortgage Express and Emex are still at it today– thus adversely affecting Consumers Interests by still operating some kind of cartel. The Directors of these 2 companies I would not be surprised to hear shared the same toilet facilities and dined in the same Directors Dining Rooms. Might be worth finding out!!

The careless Lending policies pursued by Bradford & Bingley’s Management led to their spectacular financial collapse in the autumn of 2008 and a peek at the Lending Book of Emex could prove illuminating if not downright alarming.

Both Bradford & Bingley BS and Emex are still trying it on today with their excessive SVRs to existing Borrowers which bear a remarkable similarity.






Bank of Ireland. In spite of all their difficulties Bank of Ireland are behaving honourably and when my current interest fix finishes it will revert to their SVR that is currently 2.5%


HSBC Commercial Mortgage Loan has been adjusted in line with BoE. They behave honourably and I have no complaints to make about them.

One may well observe that, if Bank of Ireland and HSBC behave honourably in trying circumstances why not the rest of them?


DEFENCELESS**existing CUSTOMERS _ Consequences for Borrowers - Now and in the Future**


A particularly vicious consequence of the Loan Shark Lenders policies for existing Borrowers at the present time is that it is virtually impossible for them to “switch” to another Lender because

• There may be a negative equity situation, which has arisen as a result of the fall in property prices.

Or……

• There may be insufficient equity to make the “switch” possible or worthwhile, as new Lending at competitive rates all require up to 40% deposits.

These homeowners are COMPLETELY AT THE MERCY of the existing Lender. They are SNARED in a high interest rate trap. This is unfair, inequitable and unjust and it arises solely because of the unreasonable (illegal?) policies of certain Lenders to existing Borrower customers. These home owners cannot sell because they cannot realise sufficient to repay the Lender in some cases, yet they may well have lost their jobs or seen a reduction in their income…….

…….and you can be sure that these Shylock Lenders are fully aware of the situation.



But what of the future** if these Unfair Terms Implied / implicit / whatever, are allowed to stand unchallenged??

The future is bleak indeed unless something is done.

These unscrupulous Lenders will simply pile more misery on top of misery as Interest Rates increase in future. Could anyone seriously expect them to hold their present usurious rates whilst BoE rate recovered to 3% or more?? - Highly unlikely.

Their Borrowers would be trapped effectively, for years, if not indefinitely!

In fact the scenario could be even worse because the really heinous thing about this whole Unfair Terms & Conditions situation regarding SVR setting is that when the time comes, unscrupulous Lenders can deliberately hoist their rates until the Home Owners could no longer afford the repayments enabling the Lenders to “Repo” the properties at knock down valuations and sell them on at a huge profit.

You don’t believe it? Their despicable actions to date leave me in little doubt that some would try it, if something weren’t done!


I believe that when the Public become aware of the scale of the problem, they will be as angered and disgusted, as I am, that a Government owned Lender – Bradford & Bingley Building Society, was bailed out by the UK Tax Payer last year and is still practising usurious lending policies.


Perhaps it is time that our Political Masters reread Shakespeare’s “Merchant of Venice.” They might just see a parallel with our contemporary times and deal with these modern day Shylocks accordingly.

April 2009