MSE News: Mortgage blow as building society hikes SVR

The_Dentist

Despite my (misguided?) faith in the FSA/FOS and that they will apply legislation, guidance, rules etc fairly I can't help but feel that at a very high level big boys do big deals over lunch etc and to hell with the rest of us. i.e. politics.

There must be an element of, Large Society to rescue of small Society at suggestion of FSA = lighter regulatory touch on any annoying issues lying around for Large Society.

Dan_1976

Your prob correct, the FSA would rathet the smaller fish get swallowed up to save the government stepping in again.

Look at the mergers that have happened around the crunch, in normal economic conditions they would never be approved.

MarkyMarkD

Chesham might have (almost definitely has) quite enough capital at this moment for its existing business.

But it's losing money day-after-day.

So, Skipton acquiring it doesn't cause Skipton an issue. (Nor did Scarborough).

But by acquiring it, Skipton can resolve its issues because Skipton's funding costs are probably less than Chesham's, because it's massively bigger.

In no case where a very large society acquires a very small one, is a vote of the large society's members required. It is simply too small to make any real difference to Skipton.

Don't get hung up on red herrings.

dasilva_2

MarkyMarkD wrote: »

Chesham might have (almost definitely has) quite enough capital at this moment for its existing business.

But it's losing money day-after-day.

So, Skipton acquiring it doesn't cause Skipton an issue. (Nor did Scarborough).

.

You seem to speak nonsense very authoritatively.
How can a business acquiring another business that in your words is 'losing money day after day' not cause an issue to that business.
Particularly since in your previous posts you have stated that the purchasing business is only able to stay adequately solvent by reneging on its promises to its existing customers.

de1amo

i seem to have lost the plot on this thread---but it seems skipton's management seem to have completely lost its business plot--i am amazed how the fsa let these clowns continue on their self destruction route

Dan_1976

The Chesham will be taken apart, the good stuff they will keep, the rest will be sold on.

de1amo

who will buy assets of a company that is losing day on day--they could be left with the chaff and redundencies to pay

sarahbennett

"A typical Chesham borrower is on a base-rate tracker mortgage of just 0.99 per cent – 0.49 percentage points over the Bank rate – while the society has to pay higher rates to attract and retain savings. Borrowers will remain on these ultra-low tracker rates, which are no longer available on new mortgages, as part of the takeover by the Skipton."
http://www.ft.com/cms/s/2/7d661880-2307-11df-a25f-00144feab49a.html

Of course these rates should not be reneged on either, but do we really trust Skipton to hold to that, say, 6 months after the vote?

Recalling David Cutter March 4th last year: "We have pledged our residential standard variable rate will never be more than 3 per cent above base rate and, even with this at its lowest level for 315 years, we will honour our promise."
http://www.ftadviser.com/FinancialAdviser/Mortgages/News/article/20100128/5f582004-068d-11df-9b61-00144f2af8e8/Skipton-signals-end-to-grace-SVR-period.jsp

A year later he cites that the low interest rates enable him to revoke the guarantee.

"When Skipton announced it was taking over the Scarborough Building Society in November 2008 society chiefs told staff no jobs would be lost compulsorily in the process. However just months after the assurances 30 Scarborough jobs were lost when the societies merged and it made public on 27 January 2010 that a further 90 job losses are in the pipeline."
http://en.wikipedia.org/wiki/Skipton_Building_Society

So if I were a Chesham member on any of their mortgages, I'd not vote to merge with the Skipton, would you? Mortgage agreement terms must be kept for their duration, therefore the Chesham members with ultra low rates are not being given any special concession by Skipton (the fact it might be being presented as if it is may be telling of itself...)

MarkyMarkD

Of course Skipton will keep to the Chesham terms, for two reasons:

* firstly, these are genuine lifetime trackers, not SVRs with a "base rate cap except in exceptional circumstances" clause; and
* secondly, because there is presumably no "exceptional circumstances" clause in these contracts.

Chesham's SVR is 6.45%, so I don't think any borrowers paying that have much to fear from a Skipton takeover.

Dan_1976

de1amo wrote: »

who will buy assets of a company that is losing day on day--they could be left with the chaff and redundencies to pay

People even buy bad debt!

They may not sell the business, but the books, property and other assets.