MSE News: Mortgage blow as building society hikes SVR

sarahbennett

MarkyMarkD wrote: »

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.

Chesham's SVR is 6.45% true, but not many of their borrowers are on it. Most Chesham borrowers are on 0.99%, and this cohort have much to fear. (There are technical arguments that may make the case against this group easier to press than the case against the Skipton borrowers).

The 6.45% cohort may have just as much to fear, if for example Skipton opted to raise its SVR to 6.99% or more, following the acquisition. If unopposed, which as you know is now not looking very likely, they can raise the interest to whatever they like. Without reading the Chesham SVR agreements I'm not sure what their position is legally, but if I were them I'd certainly be very wary of being persuaded to get onto a Skipton 4.95% deal without first taking legal advice. I'd rather be paying 6.45% than 12% or more. If they are really able to exercise the exceptional circumstances clause in the way they wish to, they could set mortgages at whatever rates they like post takeover. Buyer beware.

In David Cutter's announcement he specifically cited the circumstances he considers now to be exceptional as circumstances under which the Skipton guarantee would not be broken. Therefore, at the least he will have committed an offence related to the FSA rules on bank and building society announcements.

The SVR of Skipton is in its terms a genuine lifetime tracker, I have compared several agreements now, other than being called SVR it does not vary from genuine lifetime trackers in any way, even some of these have get-out clauses of some kind, though they have never to my knowledge been invoked.

The "exceptional circumstances" clause of the Skipton is one that no lawyer seems prepared to go up in public and defend as legal under the UTCCRs and plenty are prepared to say that they do not think such a term is fair.

I hold that even if we take this term "as is" there is no precedent for the types of circumstances Skipton cite as enabling them to get out of the agreement, and there is precedent for the types of circumstances they refer to specifically not enabling them to do so. And as the case law on these preceded my mortgage offer, and I suspect many others, if they had wished to use the term in a way that directly contradicted precedent they should, even as you acknowledge in earlier posts, have disclosed this. As they drafted the term, the benefit of doubt lies with the other party as to its interpretation and they do not reserve the right in these SVR contracts to define what is meant by exceptional circumstances.(as in the IMF example I gave earlier). That would be the minimum I'd expect to see to give this get-out any level of enforceability whatever in cases where exceptional circumstances are not mutually agreed with the lender.

They should have put a floor on the base rate if they had intended (as they now clearly do) to impose such a floor, and they should have indicated that their interest margin may be exceptional circumstances. These are clear financial metrics that many lenders do apply in their policies.

And you are not right that they can't (initially at least) wriggle out of their Chesham agreements in a similar way, there are other routes to doing so that I certainly will not publicly disclose, but if anything those agreements in my view are legally even less secure than Skipton's own 3% guarantee.

I now feel I'm repeating myself on certain topics! *big sigh*

sarahbennett

MarkyMarkD wrote: »

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.

Despite all our previous discussions you still seem to think that (a) Skipton's revocation of its guarantee under the circumstances it describes is legal, and that it has not breached the terms of its own SVR mortgage; (b) that Skipton will always act legally, and (c) that there is no mechanism under which they can at least as spuriously try it on with the Chesham borrowers. They are, I'm sure, already building a case, indeed I doubt they'd be taking chesham over if they weren't expecting to get away with increasing these tracker rates. But I'm equally sure that they are saving it all until after the vote (just as they did with the "there will be no redundancies" line prior to the Scarborough takeover). If I were at Chesham, given this record, no way would I vote yes.

MarkyMarkD

Well, as previously, we'll have to agree to disagree.

Frankly, I think you are being ridiculous if you expect Skipton to attempt to over-ride straightforward lifetime tracker mortgage agreements, unless they incorporate an exceptional circumstances clause.

I know you don't want to recognise this, but there IS a dramatic difference between a straightforward lifetime tracker mortgage, and an SVR with a cap which is a lifetime tracker where the cap can fail in exceptional circumstances. I'm not rehashing the argument of whether that exceptional circumstances clause is legally effective or not - you have your views on that and you are welcome to them - but emphasising that there is a difference and straightforward lifetime trackers are safe. And most lifetime trackers do NOT incorporate exceptional circs clauses. I have a Barclays lifetime tracker. There are no exceptional circs clauses. The lifetime tracker is a lifetime tracker.

Unless you have evidence that Chesham tracker rates incorporate an exceptional circs clause, you are scaremongering and there is nothing for Chesham lifetime tracker borrowers to fear.

On SVRs, you seriously think that a borrower paying 6.45% variable should object to switching (at no cost) to an SVR of 4.95% just because the 4.95% could be increased? Wake up and smell the coffee! These people are not going to be given the Skipton SVR with the lifetime tracker cap (subject to exceptional circs), because why on earth should they? Given the total insignificance of Chesham to Skipton (it is under 1/50th of Skipton's size) I expect they will be given 4.95% without the cap. Which is great news for them.

If that's the deal, you can scarcemonger as much as you like but 99% of Chesham SVR borrowers will sign up with glee.

(BTW I suppose (and there is precedent) that Skipton might leave the Chesham borrowers on the Chesham SVR. That's what Nationwide did with Dunfermline. And that wouldn't be unfair either).

sarahbennett

MarkyMarkD wrote: »

Frankly, I think you are being ridiculous if you expect Skipton to attempt to over-ride straightforward lifetime tracker mortgage agreements, unless they incorporate an exceptional circumstances clause.

In which case they are not straightforward...

MarkyMarkD wrote: »

I know you don't want to recognise this, but there IS a dramatic difference between a straightforward lifetime tracker mortgage, and an SVR with a cap which is a lifetime tracker where the cap can fail in exceptional circumstances.

I'd agree there's a difference but not a dramatic one. You fail to address the fact that Skipton does not, according to the terms, have any right to define what is meant by exceptional circumstances.

MarkyMarkD wrote: »

I'm not rehashing the argument of whether that exceptional circumstances clause is legally effective or not ...

Agreed. But I think you are missing the point that even if legally effective (a) the term must be interpreted in the interests of the consumer (using the consumer's definition), as it was drafted by Skipton, (b) nowhere does Skipton reserve the right to define what is meant by exceptional circumstances, and (c) it is unprecedented in lender-borrower agreements for exceptional circumstances to refer to those Skipton have elected to select, and there is case law that specifically indicates it cannot be.

MarkyMarkD wrote: »

but emphasising that there is a difference and straightforward lifetime trackers are safe. And most lifetime trackers do NOT incorporate exceptional circs clauses. I have a Barclays lifetime tracker. There are no exceptional circs clauses. The lifetime tracker is a lifetime tracker.

Mark, I am not a lawyer, but you are _really_ not a lawyer. I told you I'd not go into the legal arguments on this thread because I really don't want to be giving away that kind of ammunition. Unilaterally drafted, catch-all get-out clauses are not enforceable anyway and any manner of agreement has them. I could add just as vehemently. A guarantee is a guarantee.

MarkyMarkD wrote: »

Unless you have evidence that Chesham tracker rates incorporate an exceptional circs clause, you are scaremongering and there is nothing for Chesham lifetime tracker borrowers to fear.

Exceptional circs clauses are a weak way to get out of a guarantee especially if the drafter does not reserve the right to define what is meant by them, and the default right rests with the signer. I really don't want to put possible legal arguments here but I can assure you I am not scaremongering.

MarkyMarkD wrote: »

On SVRs, you seriously think that a borrower paying 6.45% variable should object to switching (at no cost) to an SVR of 4.95% just because the 4.95% could be increased?

If they are sensible and actually read their contracts then yes.

MarkyMarkD wrote: »

Wake up and smell the coffee!

You sound like you need to calm down, Mark :-)

MarkyMarkD wrote: »

These people are not going to be given the Skipton SVR with the lifetime tracker cap (subject to exceptional circs), because why on earth should they? Given the total insignificance of Chesham to Skipton (it is under 1/50th of Skipton's size) I expect they will be given 4.95% without the cap. Which is great news for them.

As I said, that entirely depends on whether their mortgage has a cap or not.

MarkyMarkD wrote: »

If that's the deal, you can scarcemonger as much as you like but 99% of Chesham SVR borrowers will sign up with glee.

Accusing me of scaremongering is not fair. It should be perfectly understandable why I would not wish to lay down in public possible approaches that Skipton may take to the majority of Chesham borrowers on 0.99%. I think, given Skipton's track record as I have outlined here, if I were a Chesham member I'd not vote for, not in a million years. This is my frank and informed opinion. I'd simply rather that someone capable of showing more honesty and integrity took on my mortgage, and that means almost anyone else...Do you not think the announcement David Cutter made on March 4th was dishonest? It was not simply an expression of intention, but a clear commitment.

MarkyMarkD wrote: »

(BTW I suppose (and there is precedent) that Skipton might leave the Chesham borrowers on the Chesham SVR. That's what Nationwide did with Dunfermline. And that wouldn't be unfair either).

I'll give you that. I agree with that point, nothing wrong with it

MarkyMarkD

I'm not going to answer most of those points, because all you are doing is making points (which you've already made) which aren't actually relevant to what I'm saying.

If I say "in respect of A, this applies" and you say "ah, but you are ignoring B" where B is actually nothing to do with A, we are not having a conversation, we are both just talking to ourselves.

In respect of the takeover, Skipton agreements will not be substituted for Chesham agreements, so you are wrong that it makes sense to turn down the Skipton offer "if they read the agreement". In all takeovers of this type, the original contract terms persist.

The only issue is how the Chesham SVR is defined in future. And given that it could be set at ANY LEVEL Chesham liked, it isn't going to be any worse under Skipton's ownership.

David Cutter's commitment was based on the Society's circumstances at that time, and he was wrong to make it in the terms he did. But that statement didn't change the terms of the contracts in place. It was simply a foolish statement.

There is ample FOS history which shows that financial institutions are not held to mistaken comments they make, where they made no difference to the customer's behaviour. You didn't take out your mortgage after March 4th so you have no axe to grind on that particular aspect. Those who did, do.

The_Dentist

MarkyMarkD wrote: »

David Cutter's commitment was based on the Society's circumstances at that time, and he was wrong to make it in the terms he did. But that statement didn't change the terms of the contracts in place. It was simply a foolish statement.

There is ample FOS history which shows that financial institutions are not held to mistaken comments they make, where they made no difference to the customer's behaviour. You didn't take out your mortgage after March 4th so you have no axe to grind on that particular aspect. Those who did, do.

I am not sure the circumstances in March 2009 were any different to the circumstances in January 2010. In fact the circumstances cited in the later statement appear to have prevailed when the original statement was made.

In any event what is mistaken about the original statement? I would suggest nothing. Your suggested FOS decisions do not apply.

I am not convinced the statement has no contractual implications. It sounds and looks like a unilateral obligation to existing mortgage customers to me. It is probably irrelevant how foolish or sensible the statement was. The Society may have acquiesced its ability to later revoke the SVR Cap Guarantee. Even in the event that this is not acquiescence it strikes me that in Treating Customers Fairly, borrowers should be entitled to rely on the statements of employees of the Society.

Your view of customers behaviour is very narrow, it can't possibly just be limited to people taking out mortgages after 4 March 2009. What about people who as a consequence of the statement decide to move home and take their mortgage with them as well as borrowing additional sums. People may decide to rent out their home as a consequence of the statement instead of selling. Some people may cancel plans to remortgage to another lender and instead stay with the Skipton.

sarahbennett

The_Dentist wrote: »

Some people may cancel plans to remortgage to another lender and instead stay with the Skipton.

Which is what I did. If I'd had any concerns the Skipton would renege on their guarantee due to a base rate favourable to their customers, I'd have switched, before everyone else upped their tracker offerings...

sarahbennett

MarkyMarkD wrote: »

I'm not going to answer most of those points, because all you are doing is making points (which you've already made) which aren't actually relevant to what I'm saying. If I say "in respect of A, this applies" and you say "ah, but you are ignoring B" where B is actually nothing to do with A, we are not having a conversation, we are both just talking to ourselves.

If you say so. One thing I'll say is that you seem pretty convinced that exceptional circs clauses added to the end of a tracker guarantee make any difference to it at all. Can you think of any examples where in such circumstances such a clause has been successfully invoked? any at all?

MarkyMarkD wrote: »

In respect of the takeover, Skipton agreements will not be substituted for Chesham agreements, so you are wrong that it makes sense to turn down the Skipton offer "if they read the agreement". In all takeovers of this type, the original contract terms persist.

Thanks for this Mark, that's useful information. What I'm trying to suggest though is that Skipton does not have a good track record in keeping to terms of agreements for both borrowers and savers, so if I were a Cheshire borrower happy with my terms I'd not trust the Skipton to hold itself to them.

MarkyMarkD wrote: »

The only issue is how the Chesham SVR is defined in future. And given that it could be set at ANY LEVEL Chesham liked, it isn't going to be any worse under Skipton's ownership.

I think you really need to read the agreement to suggest it can be set at any level Chesham liked. That it isn't going to be any worse under Skipton's ownership is doubtful, most lenders only increase rates by small increments at a time (say 0.25%), whereas the Skipton gave just a month's notice to raise its interest rates more than, known to me, any building society or mainstream mortgage lender has in history. If there are no caps or guarantees on the mortgage all you have to go by is the track record of how the lender behaves, whether they are likely to treat you reasonably. Here Skipton falls flat on its face.

MarkyMarkD wrote: »

David Cutter's commitment was based on the Society's circumstances at that time, and he was wrong to make it in the terms he did. But that statement didn't change the terms of the contracts in place. It was simply a foolish statement.

I am glad we can agree he was wrong to make the statement in the terms he did, and the circumstances cited in his statement as not altering the guarantee (low base rate) and circumstances being cited now to get out of the guarantee (low base rate) have not changed. Of course it does not change what is written down, but is a commitment made by the Society through its CEO, of how it interprets what is written down. That the guarantee is a guarantee "We have pledged our residential standard variable rate will never be more than 3 per cent above base rate" sounds pretty clear to me, that their reading of the guarantee is the same as borrowers, and that the low base rate does not enable them, in these circumstances to wriggle out of their promise.

MarkyMarkD wrote: »

There is ample FOS history which shows that financial institutions are not held to mistaken comments they make, where they made no difference to the customer's behaviour. You didn't take out your mortgage after March 4th so you have no axe to grind on that particular aspect. Those who did, do.

I'm sure you can appreciate that a statement like this, if false, is not lawful under FSA rules, one poster has even suggested it may be criminal. (I am interested to hear more about this). There is however no reason to believe this statement was an error since in no way does it contradict the written terms.

sarahbennett

Excellent article in today's Mail...
http://www.dailymail.co.uk/money/article-1254228/Pay-rise-Skipton-boss-Cutter-fuels-outrage-broken-pledge.html

MarkyMarkD

I'm afraid that "excellent article" and "Daily Mail" don't often belong in the same sentence.

Cutter was appointed deputy CEO of Skipton in August 2008, and then CEO of Skipton on 1 January 2009 as far as I am aware. So comparing his salary in 2009 with his 2008 salary when he was not CEO (and not even deputy CEO before August), it is scarcely surprising that he had an increase. D'oh!

Skipton is a vastly more complex business than Yorkshire, which they compare his earnings with the CEO of.

And criticising a CEO for having a holiday with his family - please! They'll be complaining that he lets his children eat, next. Childish comments.


SVRs are normally entirely variable, entirely at the discretion of the lender, and for no reason at all. I am completely convinced - and I'm sure that you will concur - that SVR wording would not be acceptable under Unfair Contract Terms regulations if it were not that almost all lenders have operated in that way for their entire lives and it would not be reasonable for those pre-existing terms to be declared illegal via the Unfair Contract Terms legislation. But we could digress forever on that topic.

In respect of SVR contracts, I guess that the lenders would rely on the "but if we increase the rate and you don't like it, you can exit freely". But even that isn't always the case - discounts based on SVR often incorporate Early Repayment Charges and those are not negated by an increase in the underlying SVR.