MSE News: Mortgage blow as building society hikes SVR

shortben

Does anyone know what other Building Societies have this "Exceptional Circumstances" clause?

Is it just Skipton?

sarahbennett

According to this:
http://www.dailymail.co.uk/news/article-1091563/Brown-raises-prospect-rates-falling-ZERO-bank-cuts-1.html

Cited here:
http://www.legalbeagles.info/forums/showthread.php?t=13585

The government is keen for cuts to be passed on to homeowners so I would not propose potentially putting their backs up with a petition just yet, based on what I have read I think we can for the moment safely assume that on this issue they are on our side.

There is already a petition: http://petition.zedbox.com. I intend to send out one email when the petition is concluded to let the petitioners know about proposed next steps in the campaign against Skipton's SVR hike, and they can then (1) opt out of the list or (2) choose to stay informed.

The problem with the No 10 petition I think is that there is no way the petitioners would subsequently be able to make contact with one another or to email the list of those who have signed, making it less effective as a campaigning tool. Also I worry that insufficient signatures there might jeopardise our case by making the government think there's a lack of support among voters (if petition zedbox doesn't get lots of signatures No 10 does not has to know about it!)

Having said that it is hardly that the No 10 is a petition on a wider issue... I just worry a bit about splitting the signatures so that some people only sign one petition... it's important I think that those who specifically object to the Skipton SVR hike sign that specific petition, and those who support the wider issue sign that one. I actually don't support the wider issue, my grumble is I feel the Skipton has broken its guarantee by invoking a clause inappropriately. If another party has no such guarantee or offers a different SVR to new borrowers I've no issue. The issue I have is over breach of agreement, that may lead to a dangerous precedent in the sector, and the potential acceptability of catch-all get-out clauses...

sarahbennett

Also, can the Skipton not borrow money at the base rate? I thought that's what base rate means?

poppy10_2

sarahbennett wrote: »

Also, can the Skipton not borrow money at the base rate? I thought that's what base rate means?

The base rate is the rate at which the BoE provides overnight lending to qualified banks.

Mortgages require longer-term financing than overnight rates. And different institutions have to pay different rates based on their perceived risk to other banks - just like people with bad credit ratings have to pay higher interest rates for loans and credit cards.

Skipton is widely seen as being on dodgy ground in terms of long-term viability, so other banks are reluctant to lend to it unless Skipton makes it worth their while by paying high rates. Thus Skipton have to pass these rates on to their customers.

poppy10_2

Norwich & Peterborough have today followed in Skiptons' footsteps by increasing their SVR too:

Norwich & Peterborough is the latest building society to hike its standard variable mortgage rate.

Britain's ninth-biggest building society will increase the SVR for both new and existing customers from 4.85 per cent to 5.35 per cent from today.

A spokesman for N&P says: 'We are well funded and in low arrears, but have experienced great pressure on income due to circumstances beyond our control - a competitive savings market with unfair competition. We have been forced to make this change.'
"While in absolute terms savings rates seem to be low, relative to the base rate they are actually quite high," he said. "Our margins have been crushed – that's really the rationale behind the move."

Many N&P customers have a mortgage that is reviewed annually. This means they will not see an increase in their repayments until their next review, in 2011. However, they will, effectively, be underpaying their loan. So anyone who wants to raise their monthly payment now to avoid a big increase next year will be allowed to do so.

Several smaller building societies including Kent Reliance and Cambridge have also raised their SVRs in recent weeks.

Thrugelmir

dasilva wrote: »

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.

So you are commenting on something you haven't actually read.

dasilva_2

Thrugelmir wrote: »

So you are commenting on something you haven't actually read.

I didn't say I hadn't read it, you asked me about my mortgage conditions, which are not linked to the Skipton.
Why don't you participate in the discussion instead of being pedantic.

Thrugelmir

dasilva wrote: »

I didn't say I hadn't read it, you asked me about my mortgage conditions, which are not linked to the Skipton.
Why don't you participate in the discussion instead of being pedantic.

I have a life time tracker ay .35% above base with a Building Society. When the Norwich & Peterborough broke ranks and raised its tracker mortgages. I took the opportunity to read my contract very closely. There are very clear contractual terms that would enable the BS to amend my interest rate if they so wished.

Hence my interest in similar contractual terms elsewhere. References to websites, guarantees and exceptional circumstances are consumer terms. As the contract itself gives explicit conditions under which variation can be made.

So I have a personal interest in the matter. Yet also understand the wider financial issues for the BS's themselves. There is a lot of financial misinformation on the forums. Yet a lot of information is readily available from sources such as BOE, FSA, CML if people take the trouble to read it. A 50 page report is not easily summarised into a 200 word BBC news item.

dasilva_2

Thrigelmir. ' As the contract itself gives explicit conditions under which variation can be made. '
That would be fine, but if you take the opportunity of reading the Skipton Contract (which I have by the way even though I do not have a Skipton mortgage) it is not an explicit condition that it has use to invoke the removal of its guarantee. It is just an 'exceptional circumstances' clause, which is not explicit. It could mean absolutely anything. You also state in your post that 'exceptional circumstances' is a consumer term as oppose to the contractual term that your building society quotes. In the case of the Skipton, this is incorrect as it is a term used in their contract, albeit a contract formed with a consumer.
My argument is that they could have include 'clear contractual' terms in their contract from the outset. No one could argue against a term in their contract that stated that the 3% guarantee would only exist when the BOE rate was above 2.7% or their other 'defined' condition, if that term existed in the original agreed contract.
The Skipton quote this UK average branch instant access rate (as published by the BOE). The interesting thing is the BOE Monetary and Financial statistics Department who are responsible for this figure had to ring me back to tell me how to get hold of it, so it is obviousley not quoted that frequently.

MarkyMarkD

Lots of posts since my last one.

To go backwards (or answer them randomly):

- the BoE data is easy to find on their website. I can do so and I'm not that clever.
- sarahbennet's point about FSA prior approval or not is a red herring. Skipton will have told FSA that they wanted to do this. FSA would have stopped them doing it, if it believed that this was a breach of "Treating Customers Fairly". There is no way that the FSA, as regulator, would allow a financial institution to treat 60,000 or 100,000 customers in a way they deem unfair. The FSA don't approve things, they simply do not object if they are not unhappy. It's all double negatives but it has the same effect as them having given Skipton prior approval.
- sarahbennet's interpretation of what is exceptional is wrong. I doubt that there has ever been an occasion when the relationship between High Street savings rates - the source of most of Skipton's funds - and Bank of England base rate has been as it is now. If you tracked the data (on the BoE website) over time, I doubt average savings rates have even gone anywhere near as high as BBR in the past, let alone being almost at the same level as they are now.
- sarahbennet's arguments about Skipton's improvidence are rubbish. The only material bit of improvidence that Skipton have committed is to offer an SVR capped at BBR+3% - but they weren't improvident, because they included an "exceptional circumstances" clause. It can be argued - with a lot of validity - that both the "exceptional circumstances" clause, and the way that they have applied it (significantly after the first date it would have been reasonable to do so) reflect an intention, and an actual behaviour, of delaying the adverse impact on borrowers until the latest possible occasion - Treating Customers Fairly at its best. As others have posted, they have eaten into reserves until it has become impossible for them to do so.
- the Scarborough issue is a red herring too. The argument that acquiring Scarborough has eaten up Skipton's reserves makes no sense - Scarborough's assets were written down and they effectively acquired them for nothing. Quite the opposite - costs can be saved through rationalisation, and as provisions are written back (if the Scarborough assets are managed well) Skipton members will benefit.
- sarahbennet's claim that she knew base rate was going to fall to a very low level and that she'd therefore benefit is pie in the sky and nobody reviewing a complaint/claim is ever going to believe that. Do you have a crystal ball so you can predict things which all the banks and building societies did not believe would happen? Anyway, as I keep saying, the base rate fall is not the essential thing that has made things exceptional - Skipton would be fine (and would not have exercised the clause) if savings rates were where they should be with a 0.5% base rate, i.e. about 2%-3% lower than they are now.
- sarahbennet's arguments that by paying SVR in order to derive this benefit, she paid over the odds and deserves to repay less than her account balance to walk away, is also cobblers. You borrowed at SVR because it was the best rate available to you, I presume, rather than for some spurious future benefit. There were plenty of genuine lifetime trackers around at the time, cheaper than Skipton SVR, for anyone in normal borrowing circumstances.

The most interesting points are regarding those customers acquired since the exceptional circumstances have been triggered. This is where I accept that Skipton's argument is the weakest. They would certainly have been better doing what Nationwide did, and launching a new SVR-type product without the guarantee. They presumably did not do so, because they did not expect the adverse circumstances to continue, and therefore did not expect to have to exercise the exceptional circumstances clause. That was daft - they could, in fact, have simply stopped offering SVR products at all and simply offered lifetime trackers at a higher tracking rate.