MSE News: Mortgage blow as building society hikes SVR

Thrugelmir

dasilva wrote: »

Ron2256.
What I am saying is
1. they have an exceptional circumstances clause in their mortgage contract.
2. They are the ones that defining what those exceptional circumstances are. Please look at their website as it clearly states and I quote 'what are exceptional circumstances:- The circumstances currently prevailing are exceptional under each of two separate tests, which have recently been defined by the Society's board as follows:
1. Base Rate is less than or equal to 2.7%
or
2. Base Rate minus the UK average Branch Instant Access savings rate (as published monthly by the Bank of England) is less than or equal to 2.5% for each of the three preceding months'
These conditions were met in oct 2008 yet Skipton continued to market a product with a guarantee that was not guaranteed because their own exceptional circumstances prevailed at the time.
I am actually saying that if that was the exceptional circumstances that they were stating, they should have acted on them when they started to prevail or at least explained that the circumstances prevailed at the time, but they were holding off acting on them.
The fact that they also state that the exceptional circumstances were only 'recently' defined would indicate that they were just making it up as they went along

For clarity. What does your mortgage agreement say in the small print in relation to interest charges and the changes/amendment too.

dasilva_2

Thrugelmir wrote: »

For clarity. What does your mortgage agreement say in the small print in relation to interest charges and the changes/amendment too.

For clarity, it does not relate to Skipton Building Society so I fail to see how it can have any relevance to a skipton building society agreement.
As you seem to be knowledgable, perhaps you can advise me otherwise.

Thrugelmir

dasilva wrote: »

For clarity, it does not relate to Skipton Building Society so I fail to see how it can have any relevance to a skipton building society agreement.
As you seem to be knowledgable, perhaps you can advise me otherwise.

My mortgage agreement which I don't have to hand, but have published up on here previously. Has a very specific clause in relation to this.

If you haven't got a mortgage with Skipton, how can you comment on the actual contract that was signed?

elephant32

sarahbennett wrote: »

We're going to have to pull together all our resources to stop Skipton from getting away with what they are trying to do, almost all of us will have other things to do and pressures on our lives.

Well said sarahbennett. Looks like I might have an actual reason to join facebook at last!

I do agree with dasilva though that the more organised we can be, the better chance we have.
Does anyone on here have any legal expertise they could contribute?, my research indicates that the unfair terms in consumer contracts act should apply here.

Does anyone know how we can get Martin Lewis' attention on this one? There are apparently 100,000 borrowers affected, so some media coverage should be possible. Well done sarahbennett for getting it on the bbc.

We can (and should) all complain to skipton, the Ombudsman, the FSA and the OFT, but it would be better still if we could get some sort of class action together - I would be more than happy to accept the view of the courts on whether the defining of exceptional circumstances in this way is legal or not - it sure beats everyone arguing about it on here!

sarahbennett wrote: »

(remember it's a petition to Skipton not the government, the government has not approved what Skipton are doing so we have no issue with No10 at this point, methinks)

I disagree with that, No10 failed to regulate the banks to require even a loose link between their self-defined lending rates (SVRs), and the bank of england rate - when that link is broken by other banks (as it will be if the skipton are allowed to get away with this much greater transgression), the bank of england rate will become meaningless to the wider lending market, and hence the bank of england will lose the ability to use interest rates to manage the economy as they have done in recent months....maybe another economic meltdown is on the way.

Why has the government STILL not learned that they either have to let the market operate freely, including letting banks go under if they make bad commercial decisions, or they have to regulate for every eventuality. Imposing limited regulation only after the problem has arisen just pushes the problem elsewhere in the economy.

That`s why we need the No.10 petition to gain momentum - so the government takes notice. (and it might just help shame the skipton into considering their moral resposibilities)

dasilva_2

Thrugelmir wrote: »

My mortgage agreement which I don't have to hand, but have published up on here previously. Has a very specific clause in relation to this.

If you haven't got a mortgage with Skipton, how can you comment on the actual contract that was signed?

So are you saying a lawyer can only comment on an agreement if he has a vested interest in that agreement.
I am free to comment on whatever. This is a public forum.
I am perfectly entitled to comment on what Skipton put into the public domain.
If you don't like my opinion, ignore it.
As it happens, I'm ignoring your's.

MarkyMarkD

I don't want to get over-embroiled in this thread, but there have been some very good points made.

I am not a Skipton borrower or investor and have no axe to grind from that angle.

The tests that the Skipton have used to define exceptional - albeit clearly defined after the event - are slightly odd, but I'm not sure that they are unreasonable. The second test is the key odd one, not the first - they are saying that they cannot sustain an SVR of BBR+3% if the average branch savings rate in the market is more than BBR-2.5%. That means, if you rearrange the equation, that they cannot survive on a margin between SVR and average savings rate of less than 5.5%.

I don't understand that 5.5%. Their operating costs are not 5.5%.

But equally well, comparison with average instant access passbook account rates is a daft comparison, as that will not be where Skipton are getting most of their money. The BoE publish average fixed rate bond rates and average ISA rates - both of which are probably more relevant.

Setting aside the issue of the specific tests, I don't understand Sarahbennet's view of the point of the exceptional circumstances clause. It appears from her comments that she doesn't think any circumstances could actually be exceptional, and more particularly that any circumstances related to interest rates should not be. That is not very logical. The current very low base rates ARE exceptional, but it is not them alone that is the problem for Skipton and other building societies - it's the contraction of the margin between average savings rates and average mortgage rates, to less than zero in many cases.

Demonstrably Skipton have been paying more than 3.5% for much of their savings over the past year or so, and charging just 3.5% to their SVR borrowers (and even less to their discounted mortgage borrowers, if they have any, and to their tracker mortgage borrowers, if they have any).

AND they are making far, far less than that amount on their fixed rate mortgages because they will have swapped them out to LIBOR plus a small margin.

So, there ARE exceptional circumstances on any sensible reading of the situation - because of the breakage in the relationship between savings rates and BBR.

Sarah states that the exceptional circumstances clause is not included in the KFI. I am surprised at that - because, as others have posted, the FSA has previously stated that any "small print" not in the KFI is invalid.

She also suggests that the FSA would not have given prior clearance for this change. I beg to differ. It is so high profile that I cannot accept for a moment that FSA would NOT have been informed and have confirmed that it did not have a problem with it. And that's precisely because it will have faced the choice of Skipton going bust, and Skipton making this change. And the FSA does not need any more building societies to get into difficulties.

For the reason above, I suggest that complaining to FOS is a complete waste of time. When, for example, the FSA issued guidance on mortgage exit fees, that was it. There was no point taking such cases to the FOS because they would simply not deal with them.

Number 10 petitions are also a complete waste of time - have you actually seen any change as a result of any of them?

attilathehun

MarkyMarkD wrote: »

I don't want to get over-embroiled in this thread, but there have been some very good points made.

I am not a Skipton borrower or investor and have no axe to grind from that angle.

The tests that the Skipton have used to define exceptional - albeit clearly defined after the event - are slightly odd, but I'm not sure that they are unreasonable. The second test is the key odd one, not the first - they are saying that they cannot sustain an SVR of BBR+3% if the average branch savings rate in the market is more than BBR-2.5%. That means, if you rearrange the equation, that they cannot survive on a margin between SVR and average savings rate of less than 5.5%.

I don't understand that 5.5%. Their operating costs are not 5.5%.

But equally well, comparison with average instant access passbook account rates is a daft comparison, as that will not be where Skipton are getting most of their money. The BoE publish average fixed rate bond rates and average ISA rates - both of which are probably more relevant.

Setting aside the issue of the specific tests, I don't understand Sarahbennet's view of the point of the exceptional circumstances clause. It appears from her comments that she doesn't think any circumstances could actually be exceptional, and more particularly that any circumstances related to interest rates should not be. That is not very logical. The current very low base rates ARE exceptional, but it is not them alone that is the problem for Skipton and other building societies - it's the contraction of the margin between average savings rates and average mortgage rates, to less than zero in many cases.

Demonstrably Skipton have been paying more than 3.5% for much of their savings over the past year or so, and charging just 3.5% to their SVR borrowers (and even less to their discounted mortgage borrowers, if they have any, and to their tracker mortgage borrowers, if they have any).

AND they are making far, far less than that amount on their fixed rate mortgages because they will have swapped them out to LIBOR plus a small margin.

So, there ARE exceptional circumstances on any sensible reading of the situation - because of the breakage in the relationship between savings rates and BBR.

Sarah states that the exceptional circumstances clause is not included in the KFI. I am surprised at that - because, as others have posted, the FSA has previously stated that any "small print" not in the KFI is invalid.

She also suggests that the FSA would not have given prior clearance for this change. I beg to differ. It is so high profile that I cannot accept for a moment that FSA would NOT have been informed and have confirmed that it did not have a problem with it. And that's precisely because it will have faced the choice of Skipton going bust, and Skipton making this change. And the FSA does not need any more building societies to get into difficulties.

For the reason above, I suggest that complaining to FOS is a complete waste of time. When, for example, the FSA issued guidance on mortgage exit fees, that was it. There was no point taking such cases to the FOS because they would simply not deal with them.

Number 10 petitions are also a complete waste of time - have you actually seen any change as a result of any of them?

It is clear from the posts about Skipton's SVR hike and the media as a whole that there is a variety of opinions on the validity of the society invoking "exceptional circumstances". I believe it is therefore important that this idea is tested in the courts. I am pretty sure the society is expecting this itself bearing in mind the financial impact it has on so many borrowers. I for one would be willing to contribute financially to the cost of this legal action and I will be on the lookout for news about how to support this. It should be remembered that the circumstances alleged by the Skipton to be exceptional may well last for a long time and presumably the society could hit borrowers with another rate rise each time it feels these circumstances are having an adverse affect on its business.

I believe that you can argue that the apparently weak financial state of the Skipton has occurred as a result of unfavourable rather then exceptional circumstances. It is well known that interest rates fluctuate regularly and if management had been on the ball they would have allowed for the currently unfavourable differentials in their business plan, presumably as the managers of stronger societies did. What is indisputable is the fact that the recent baling out the failing Scarborough Building Society bordered on the suicidal as it has used up a significant amount of the Skipton's reserves at exactly the time the Skipton needed them itself.

One point made in some previous posts is that Skipton borrowers could avoid the problem by simply changing their lender and this is true in many cases. However, I would expect there to be a significant number who have been made redundant or otherwise fallen on hard times during the recession and no longer have the income multiple to support a new mortgage application, though may well be able to scrape together enough to continue paying the mortgage (but not pay it off). It is particularly in the interest of this group to ensure that the legal challenge is made as they can not escape from the Skipton.

dasilva_2

MarkyMarkD. I agree with your post. For information, the Skipton website states they have consulted the FSA about their proposals.
My principal points are covered in my previous post's but there is one other thing that I think. With all the information available to the Skipton, surely a simple excel speadsheet with BOE rate's and savings rates on would have pointed out to them what limits were needed to retain their margin. One can only assume that their margin has significantly changed.
I still mantain that they would have been better going down the Nationwide route of having effectively 2 SVR's and not giving customers a guarantee that could not be guaranteed as their limits had been breached. I feel customers who have been given a mortgage offer containing this guarantee during the time when the Skipton say exceptional circumstances prevail so they will not honour that guarantee, have a clear path for a misselling claim.

sarahbennett

The FSA has not approved it, that is not how they work. They would consider this retrospectively. I gather this informally from someone who works there. If anyone can point me to anything from the FSA that suggests they've given it the thumbs up, I'd be interested, but so far I've seen no evidence. Because Skipton has sent them a letter does not mean they have any ruling. So would people please stop saying the FSA must be in agreement unless you have some evidence! To say it's inconceivable doesn't cut it. I find the whole thing inconceivable particularly the fact interest can be quoted as an exceptional circumstance. Something that happens rarely doesn't make it an exceptional circumstance in terms of lender-borrower agreements in legal terms. The Societies financial position has no more to do with things than my financial position if I can't pay back my mortgage - it does not de facto give them the right to breach terms. There is no precedent I can find to suggest it does.

A similar case against RBS on an interest rate getout clause was recently upheld by the FOS, and the FOS assures me that this is the type of complaint they would consider... however their decisions I understand are individual, on a case by case basis, and do not apply more broadly. But the FOS will consider these complaints...

There is no precedent I know of for the base rate itself to be cited to invoke a getout clause in any tracker arrangement. The whole point of a tracker is that it tracks the base rate as it goes up and down. There is nothing exceptional about people not being able to keep their promises due to their own improvidence. If times were so tough, why did the last CEO manage to get his pension of 2.3million and 1.244 million in his last year at work? Why weren't exceptional circumstances like how badly he'd managed the society invoked against him to result in a pay reduction?

Incidentally there is no small print clarification of "exceptional circumstances" in the SVR mortgage contracts, anywhere at all. It could mean so many things, one hardly knows where to begin. I passed it around today and 5 different people all had different interpretations of when this clause could be invoked - it was most revealing!

dasilva_2

sarahbennett wrote: »

The FSA has not approved it, that is not how they work. They would consider this retrospectively. I gather this informally from someone who works there. If anyone can point me to anything from the FSA that suggests they've given it the thumbs up, I'd be interested, but so far I've seen no evidence. Because Skipton has sent them a letter does not mean they have any ruling. So would people please stop saying the FSA must be in agreement unless you have some evidence! To say it's inconceivable doesn't cut it. I find the whole thing inconceivable particularly the fact interest can be quoted as an exceptional circumstance. Something that happens rarely doesn't make it an exceptional circumstance in terms of lender-borrower agreements in legal terms. The Societies financial position has no more to do with things than my financial position if I can't pay back my mortgage - it does not de facto give them the right to breach terms. There is no precedent I can find to suggest it does.

A similar case against RBS on an interest rate getout clause was recently upheld by the FOS, and the FOS assures me that this is the type of complaint they would consider... however their decisions I understand are individual, on a case by case basis, and do not apply more broadly. But the FOS will consider these complaints...

There is no precedent I know of for the base rate itself to be cited to invoke a getout clause in any tracker arrangement. The whole point of a tracker is that it tracks the base rate as it goes up and down. There is nothing exceptional about people not being able to keep their promises due to their own improvidence. If times were so tough, why did the last CEO manage to get his pension of 2.3million and 1.244 million in his last year at work? Why weren't exceptional circumstances like how badly he'd managed the society invoked against him to result in a pay reduction?

Incidentally there is no small print clarification of "exceptional circumstances" in the SVR mortgage contracts, anywhere at all. It could mean so many things, one hardly knows where to begin. I passed it around today and 5 different people all had different interpretations of when this clause could be invoked - it was most revealing!

You are probably correct about the FSA. On the skipton website it states 'As a responsible business, we are in regular dialogue with our regulator the FSA, which is aware of these changes.'
'Being aware' is not the same as 'approves'. Presumably the FSA is there to act to uphold the regulations so I would have thought they might have said that the proposal looks a bit iffy, but as someone else previously said if they know something about the Skipton we don't then it might be the lesser of two evils.
I cannot really see how they can say in this case they act individually on a case by case basis. Their regulations apply equally to everyone but I guess they mean an individual has to complain initially for them to act. If they uphold one complaint then the floodgates will open.
I therefore suggest one person composes a complaint to the FSA and let the proceedings commence.