MSE News: Mortgage blow as building society hikes SVR

MarkyMarkD

howardtheduck wrote: »

I fear we're losing sight of the purpose behind this thread.

I think you are, for it was you who raised the issue of Skipton's profitability in post #354 as it it were relevant.

danmck_2

Hi

I've had an apologetic response from David Cutter (quite a bit different from The Dentist's!), and a dismissive one from the FSA. Skipton's response is that these are exceptional times, and they understand the impact this rise (in one chunk) will have on families, and hope that the market (free of state subsidy) will rebalance sooner rather than later.

With the FSA I made my complaint over the phone and received an e-mail saying my complaint was "I accept they can increase the rate but why should I pay more when execs still get bonuses." I responded saying my complaint was regarding use of the word guarantee (and the how this affected contracts if it was worthless) , the exceptional circumstances only being able to be defined and used by the Society, and the lack of a members vote on mergers with the Scarborough and the Chesham - all of which have been done with the FSA's approval.

Their response was basically we are happy as the exceptional circumstances clause is stated in the contract (no mention of the guarantee), that they believe Skipton customers have been treated fairly at all times, and they decide whether members need to be consulted on mergers not members.

As such I expect any complaint regarding the clarity of Skipton contracts will fall on deaf ears at the FSA (which is just a paper tiger anyway).

VIGILANT22

[QUOTE=danmck__As_such_I_expect_any_complaint_regarding_the_clarity_of_Skipton_contracts_will_fall_on_deaf_ears_at_the_FSA_(which_is_just_a_paper_tiger_anyway).[/QUOTE]

The FSA would have been aware of the decision long before it was announced....Skipton would have been in consultation with them... In this current climate Skipton are not naive/arrogant/stupid enough to take this decision before having it "signed off" by the FSA.

Thrugelmir

howardtheduck wrote: »

How many of you (besides Thrugelmir, MarkyMarkD and Vigilant22) would agree that Skipton made its SVR mortgage borrowers aware of the existance of a "floor, trigger or similar feature in an appropriate manner and at both the pre-application and offer stages", in accordance with the FSA's Mortgage Conduct of Business rules?

I merely approach the topic from a perspective of commercial realism.

What I find interesting in this thread is the amount of wriggling to define a point to fit a particular circumstance.

BTL is a business. A business is an activity or enterprise entered into for the purpose of making a profit.

I fundamentally therefore fail to see why protection can be sought under consumer law. As the person entering into the venture or activity is deemed to be aware of both the rewards and risks. It would be perverse if the Skipton had to absorb the losses incurred by novice property speculators without any recourse from the remainder of its loan book.

The_Dentist

Thrugelmir wrote: »

I merely approach the topic from a perspective of commercial realism.

What I find interesting in this thread is the amount of wriggling to define a point to fit a particular circumstance.

BTL is a business. A business is an activity or enterprise entered into for the purpose of making a profit.

I fundamentally therefore fail to see why protection can be sought under consumer law. As the person entering into the venture or activity is deemed to be aware of both the rewards and risks. It would be perverse if the Skipton had to absorb the losses incurred by novice property speculators without any recourse from the remainder of its loan book.

Issues such as when you are a consumer or not are most of the time quite obvious but sometimes in the grey area in the middle. For the UTCCR 1999 (only) there is a definition:-

"consumer" means any natural person who, in contracts covered by these Regulations, is acting for purposes which are outside his trade, business or profession;

I don't think that helps much, either way.

I am reminded of HMRC who need to draw a line somewhere in relation to individuals selling items on e-bay in a personal capacity and the point which that becomes a trading activitiy and a business. Difficult.

In simple terms for UTCCR, it is the point at which you are deemed to be a big boy and don't need looking after.

It is a moot point. The definition is deliberately vaguue no doubt. If you buy 20 flats off plan and borrow to do so you are running a property business of some sort, that could be a letting business or if you are looking to flip them a trading business. If you inherit a house from your Aunt and rent it out and borrow some money on it I don't think many people would argue that you are running a business, you are acting in a personal capacity. I do think it is relevant what else you do with your time. If you have a full time job and rent out a flat it is difficult for that letting to be a business especially if you do not employ anyone in connection with it.

If what is going on can be described as wriggling (and I am not convinced it can), it seems to me that both parties to the dispute are wriggling over meaning and terms.

It is worth remembering there are two relationship here. One relationship between a landlord and tenant and one relationship between the Society and the Landlord. I can see scenarios which are not contradictory where the Landlord is a "consumer" in relation to his relationship with the society while a business in his relationship with the tenant, although I doubt that will apply to many. It is not the case that anyone has suggested so far that UTCCR 1999 applies to the Landlord (in that capacity) in his relationship with the tenant.

So looking at risk/reward as a business for the purposes of letting is a different ball game to the relationship with a lender re loan finance, even if they involve the same property.

I don't think anyone on this thread has suggested the Society absorbing BTL losses related to borrowers. That is off topic.

Has anyone on this thread let their property purely on the SVR being at 3.5% and now can't afford to do so, to the point of bankruptcy, due to an SVR rise to 4.95%?

The_Dentist

I have been allocated an adjudicator at the Ombudsman and she phoned me to let me know she had my complaint on her desk (but had not looked at it yet). She asked me if she could call me again if there was anything she did not understand!

I suppose that was a nice friendly call, but I am not convinced it was necessary!

I would like to think she has everything she needs. My documents were an inch thick!

(at least my complaint has not been rejected as vexatious or frivolous!)

There must be some people out there with what I would describe as 100% cases, where having placed full reliance on David Cutter's statement of March 2009 have taken out a mortgage only for the Society to do the reverse of what David promised.

There doesn't strike me as much difference between that statement as a press release and relying on it and an advisor providing that information at a mortgage interview. Surely both are misselling cases?

Thrugelmir

"consumer" means any natural person who, in contracts covered by these Regulations, is acting for purposes which are outside his trade, business or profession;

If you borrow money to buy a property which you subsequently let out you are trading. In your own right. As you have complete control over all decisions made.

I am reminded of HMRC who need to draw a line somewhere in relation to individuals selling items on e-bay in a personal capacity and the point which that becomes a trading activitiy and a business. Difficult.

A different scenario entirely. Buying items to resell does constitute a trade however small.

I don't think anyone on this thread has suggested the Society absorbing BTL losses related to borrowers. That is off topic.

As far as the Skipton is concerned it is not. As the rate at which money lent is priced accordingly to risk. BTL will carry a higher risk factor than standard residential mortgages.

Has anyone on this thread let their property purely on the SVR being at 3.5% and now can't afford to do so, to the point of bankruptcy, due to an SVR rise to 4.95%?

Even more reason why a borrower shouldn't be treated as a consumer in this instance. Mortgage rates are temporarily at all time lows so commercial lending rates of 6% - 8% should have been factored in before making an investment decision of this magnitude.

Dan_1976

If I can just stir it up a little!

WHo cares! Rates are still low, children are still being used as slaves across the world, including the UK. Countries put arms before food and helping children and the population and all we moan about in the UK is money problems!

Get over it!

The_Dentist

Thrugelmir wrote: »

If you borrow money to buy a property which you subsequently let out you are trading. In your own right. As you have complete control over all decisions made.

That is very authorative. Where did you find this definition? I can't find any defintion which suggests that "control over all decisions made" is a factor in establishing if trading has taken place?

It is difficult to read a definition like that into UTCCR 1999 in the context alongside, "business" and "profession".

Trading to me, in the contect of UTCCR 1999 means a series of sale like business transactions usually for a profit. For me that would rule out somone letting out one or a small number of properties as there is no frequency of the event of letting.

Thrugelmir wrote: »

As far as the Skipton is concerned it is not. As the rate at which money lent is priced accordingly to risk. BTL will carry a higher risk factor than standard residential mortgages.

Until very recently the Society priced for risk. All borrowers who let out paid a premium rate of interest. The Society passed its increased costs direct to the borrower.

Thrugelmir wrote: »

Even more reason why a borrower shouldn't be treated as a consumer in this instance. Mortgage rates are temporarily at all time lows so commercial lending rates of 6% - 8% should have been factored in before making an investment decision of this magnitude.

I would like to hear from anyone who was banking on a rate of 3.5% for an extended period of time, which led them to let out their property?

It does sound reasonable that a line between a consumer and a busines should be drawn somewhere. UTCCR 1999 seems to draw it higher than some people might like. It is lucky that even if consumer protection legislaion does not apply, basic contract construction rules can be relied upon by a business.

Thrugelmir

Trading to me, in the contect of UTCCR 1999 means a series of sale like business transactions usually for a profit

Rent I assume is paid on a monthly basis by the tenants.

Rent being charged a commercial rate with therefore the intention of generating a profit over the period of each tenancy period. With sufficent latitude to contribute towards void rental periods, maintenance and repair, and reburbishment of the property as required.
Also to generate sufficent after tax income to repay the capital debt owing on the property thereby creating a capital gain.