MSE News: Mortgage blow as building society hikes SVR

danmck_2

I'm coming to the end of a three year fix (5.59%) and currently owe £110k. This was a first time buy (a new build flat) and one sold in December for £110K so I've no chance of leaving.

The difference for me (between the SVR and 4.95) will be about £85 a month. Obviously payments are still coming down and we're not in any danger of defaulting but the 3 points "guarentee" was a factor in choosing Skipton.

Gorgeous_George

danmck wrote: »

I'm coming to the end of a three year fix (5.59%) and currently owe £110k. This was a first time buy (a new build flat) and one sold in December for £110K so I've no chance of leaving.

The difference for me (between the SVR and 4.95) will be about £85 a month. Obviously payments are still coming down and we're not in any danger of defaulting but the 3 points "guarentee" was a factor in choosing Skipton.

You could leave if you sold at £110K (or less if you made up the shortfall with an unsecured loan).

On reflection, I think that you should fight the change - but at what cost?

GG

Leon_W

I haven't contributed to this thread but read it with great interest every time it gets updated. Between you all you seem to have the arguments covered both for and against but I can't help feel that Skipton have to honour the guarantee.

I remember when rates started falling and there was a great fuss about Nationwides tracker mortgages having a collar. They took much flak for invoking it (the coallar) which, in my view, was wholly unfair as it was clearly mentioned on Key Facts documents, infact, they actually reduced the level that the collar would kick in as a concession.

The Halifax on the otherhand had much more trouble. Their Key Facts documents made no mention of a collar on the trackers they sold but had clauses in the mortgage smallprint. The Halifax had to back down.

From my own point of view as a broker I have to rely on the Key Facts (KFI) for the mortgages main terms and conditions. If it says there is a collar I'll explain what that means to the customer, and there is no ambiguity. If it states there is some form of guarantee then I will sell that mortgage based upon it. What I cannot do is be expected to read every lenders terms and conditions and point out where there are inconsistencies between the KFI and the mortgage terms as that is quite clearly impractical. No, as a broker I rely on the KFI overiding anything in the "smallprint" as much as the end consumer does otherwise the KFI becomes totally worthless, you may as well rip it up if lenders are allowed to change what are "Key Facts" about a mortgage as it makes the document meaningless.

Therefore I wish you well with your fight against Skipton as what is so "exceptional" about interest rates going down or even being at zero ? Japan had it for years !

If they wanted a safety net it should have been highlighted as a collar on the KFI, simple as that.

danmck_2

Gorgeous_George wrote: »

You could leave if you sold at £110K (or less if you made up the shortfall with an unsecured loan).

On reflection, I think that you should fight the change - but at what cost?

GG

But then where would I live?:)

As I say this is more of an annoyance at the moment - an extra £85 a month would be nice but it's not game changing. We'd be alright to about 9 - 10%. The bigger worry is that the new rate goes up with the BOE rate, or just gets raised again because they can.

I'm assuming that those with any kind of equity will be leaving (I would!) and those with very little may just sell/default so they'll be relatively few people left in my situation anyway (which presumably is why they are doing this)

Surely all this does is ruin a broker's (and the public's) trust in the Skipton - I'm suprised that the extra 1.45% (of however few people end up staying) make up for this.

Gorgeous_George

I don't think many people with equity will leave. They might not find a better rate and the costs/hassle would make it a case of 'cutting off their nose to spite their face'.

Leon W calls it right.

GG

Thrugelmir

Leon_W wrote: »

Therefore I wish you well with your fight against Skipton as what is so "exceptional" about interest rates going down or even being at zero ? Japan had it for years !

Factually incorrect. The equivalent of base rate dropped to zero. Mortgage rates bottomed out at around 3.5%.

I'm watching the outcome with interest as well.

Be interesting to see how the FSCS levies that the building societies are having to pay towards the bank bailouts will impact on the courts decision. As this is an exceptional cost, which will be incurred for a further couple of years.

MarkyMarkD

Sarah

Glad you've been missing me. There was nothing I wished to rebut. Your points have some merit and I don't see the need to challenge them.

Thrugelmir's point is interesting. If anything, Skipton have hurt their own case with their clumsy definition of what is exceptional. Thrugelmir is quite right that the FSCS levy - which costs societies around 0.5% across their entire lending book each year - is an exceptional cost which could not have been reasonably predicted as it had never, ever, cost more than a few buttons before 2008. There is no way that ANY prudent society would have predicted this and allowed for it in their Ts & Cs, other than with a "catch all" "exceptional circumstances" clause.

It comes back, again, to the fact that Skipton could easily have either (a) included a nice simple floor on the BBR used to calculated their guaranteed minimum SVR - 3% would have given them a quite satisfactory result and a lot of lenders used 3% - or (b) clarified their exceptional circumstances clause to read "any exceptional circumstances which lead the Society's average cost of funds to exceed BBR+1%" (or whatever margin they deemed appropriate).

The latter would (on a fair understanding) have captured the FSCS levy which is effectively a cost of obtaining retail funding.

Any of the above would have been relatively clear to customers - don't you think?

dasilva_2

Thrugelmir wrote: »

Factually incorrect. The equivalent of base rate dropped to zero. Mortgage rates bottomed out at around 3.5%.

Thats a bit pedantic. The skiptons SVR is linked to the BOE base rate not any average mortgage rate or credit card rate or loan shark rate.

Dan_1976

SVR's are not directly linked to the BOE BR, the Society sets it as per its business needs.

sarahbennett

Dan_1976 wrote: »

SVR's are not directly linked to the BOE BR, the Society sets it as per its business needs.

Hi Dan, need to correct you there, the Skipton's SVR is linked directly to the BOE BR, the contract is for a base rate tracker, with a guaranteed ceiling, the fact it is called an SVR is neither here nor there...

I agree with you that most SVRs are set as per a Society's business needs, and bear no relation to base rate, this one is different though, and quite unusual...