NR Tracker Rates - when lifetime may not mean lifetime!

JustKeepSwimming_2

After following the Natwest thread & others about tracker mortgages, I thought I'd dig out my original mortgage offer details. Now somewhat worried, & waiting to see what happens to N&P customers as if N&P get away with raising their rates then I'm guessing NR may not be too far behind.

I have a NR Flexi Tracker for Life FSO mortgage which has so far run at BOE base rate + 0.54%. However this appears (to me ) to be a get out clause (from my offer of loan, I can't find a key facts document) -

"We may replace the BOE base rate (in its current form) as the basis for calculating the interest rate for any of the following reasons:
1. Should it cease to exist, operate or be published temporarily or permanently
2. Should it cease to be made available to banks temporarily or permanently
3. Should we reasonably determine that it has become inappropriate as the rate on which to base the calculation of the IR

In any of the above cirumstances, the BOE base rate (in its current form) will be replaced by one of the following:
1. By an alternative rate or index not controlled by us & which we reasonably consider to be the nearest appropriate or equivalent substitute rate or index; and/or
2. By another method of determining the IR as we reasonably consider appropriate

Can anyone put this into context please? To me it reads that they can do what they like....

lisyloo

Yes I would interpret this as pretty much whatever they like.
I would say the current circumstances i.e. global economic meltdown, are extreme enough to consider this reasonable.
But that's just my interpretation and I'm not a lawyer or an economist, but they seem to have covered themselves.

luckyfool

The key there would be "reasonably determine". While there exists a Bank of England Base Rate I would struggle to see how Northern Rock would be able to get that past the courts should they try something like that on. i.e. It wouldnt be seen as reasonable to replace Bank of England Base Rate with lets say Bank of Iceland Base Rate just so they could whack rates up.

I dont think you have anything to be worried about.

TEDDYRUKSPIN

luckyfool wrote: »

The key there would be "reasonably determine". While there exists a Bank of England Base Rate I would struggle to see how Northern Rock would be able to get that past the courts should they try something like that on. i.e. It wouldnt be seen as reasonable to replace Bank of England Base Rate with lets say Bank of Iceland Base Rate just so they could whack rates up.

I dont think you have anything to be worried about.

Completely agree with the above reply.

The statement does try and get customers over but in court the wording can mean anything. So if it happens, just take them to court. Continue to pay the mortgage as normal but you will be surprised on what happens.

Thrugelmir

luckyfool wrote: »

The key there would be "reasonably determine". While there exists a Bank of England Base Rate I would struggle to see how Northern Rock would be able to get that past the courts should they try something like that on. i.e. It wouldnt be seen as reasonable to replace Bank of England Base Rate with lets say Bank of Iceland Base Rate just so they could whack rates up.

I dont think you have anything to be worried about.

The NR could base its interest rates on the basis of the actual cost of the money it borrows.

However as the NR is currently funded by the taxpayer. This wouldn't be advisable to them for political reasons alone.

Joe_Bloggs

According to this Guardian article the Northern Rock Mortgage bit will be in the hands of Chairman Richard Pym from Jan 1st 2010.
J_B.