MSE News: Mortgage blow as building society hikes SVR

Thrugelmir

Appears that the mortgage market is changing quite rapidly now. The comments from NW suggest that others may soon follow.

“It is a symptom of the market that we are having to review these rates. Other lenders have also done this and we feel this is an appropriate action to take.”

Thrugelmir

CR10 wrote: »

Britannia no longer exists as a building society. It was taken over by the Co-operative Bank. I think that the combined health of the new entity is fine though.

The Britania merged for good reason. It now has access to wholesale market funds. Without which it would have been in a similar situation to the Skipton, which is actively wanting borrowers to leave it would appear.

The building societies will raise interest rates. Borrowers can either put up with the higher rates or remortgage elsewhere, thats if they can. Which ever they choose the BS's are back in control.

Pincher

General Theory of Relativity: Mortgage rate follows Bank of England Rate

Special Theory of Relativity: Mortgage rates do not follow the BOE rate when it gets too small.

The thing is, I have never understood why the rate follows the BOE at all, if it's market forces that dictate how much interest the building society offers savers, which in turn dictates how much they have to charge borrowers to make a profit. This also applies to LIBOR funded money, since it appears that the "offer rate" disconnected with BOE as well.

It's all a big con, to make people not in on it run around like headless chickens switching products, paying ridiculous fees each time.

If we all accept there is a long term average for interest rate, and fix for 25/30 years between 5% and 6%, we can laugh our heads off and watch these mortgage advisors starve.

The mortgage bond idea was abused in the Sub-Prime crisis, but issuing 25 year fixed rate corporate bonds is a bread and butter way of raising funds. Savers can directly buy corporate bonds or go through Fixed Income funds that pay out monthly. It's all perfectly do-able until the fund managers get greedy.

The only obstacle is, there is no constant switching for generating fees, and the middlemen will starve. Like I care.

de1amo

İf the co-op and brittainia act as they have always done--ethically they should resist the call to pushing svr out of line with boe base rate-in theory attracting more customers and building strength--i went with them because of their reputation as a well run business-they had competitive rates as well-- the move to merge with each other says it all--i am with the brittania --still

[Deleted User]

de1amo wrote: »

İf the co-op and brittainia act as they have always done--ethically they should resist the call to pushing svr out of line with boe base rate-in theory attracting more customers and building strength--i went with them because of their reputation as a well run business-they had competitive rates as well-- the move to merge with each other says it all--i am with the brittania --still

I am with Smile bank (Co-op). Ten years ago they had market leading rates for their current account, cash isa and savings accounts. Now their rates are near the bottom. The reason I stay with the current account is that their customer service is still pretty good and the internet banking works like clockwork. Their savings accounts i've abandoned. Having your savings with this ethical bank comes at a high price in terms of lost interest.

shortben

Quick question...

Can Nationwide legally raise their SVR or BMR as they call it or is this it contractually agreed it will be 2% about the BOE rate?

I see from there website they use the following wording:

Please note: any mortgage products reserved on or before 29th April 2009 will revert to the Base Mortgage Rate (BMR). If you choose to switch to a new Nationwide mortgage product, the new product will revert onto our Standard Mortgage Rate (SMR).

Both are variable rates which we may vary in accordance with our mortgage terms and conditions.

However, the BMR is guaranteed to be no more than 2% above the Bank of England base rate, whilst the SMR has no upper limit or cap. If you choose to switch to a new product, it is not possible to switch back to the BMR at a later date.

If so, what do you think the likelyhood they will raise this is?

Thrugelmir

shortben wrote: »

Quick question...

Can Nationwide legally raise their SVR or BMR as they call it or is this it contractually agreed it will be 2% about the BOE rate?

I see from there website they use the following wording:

If so, what do you think the likelyhood they will raise this is?

None.

Though you cannot move off it and return. Whether its portable is another issue.

Over time naturally this committment reduces for the NW.

shortben

I just phoned and they clarified that they cannot, although I don't really trust the guy as much as people on this site. It seemed to be more opinion than fact.

I am one of the lucky ones on 2.5% rate, although my property is in negative equity so I don't really have much of a choice.

I would be stuffed if it was to rise significantly. I was paying £880 a month on a £120,000 mortgage previously, its now £560.

Here's hoping Mervyn and hs cronies keep the rate low for a while.

poppy10_2

shortben wrote: »

Quick question...

Can Nationwide legally raise their SVR or BMR as they call it or is this it contractually agreed it will be 2% about the BOE rate?

They can't increase the BMR more than the contracted 2% above Bank of England base rate. But there's nothing to stop them introducing a new, say "normal mortgage rate" NMR which had no such restrictions.

shortben

They did that last April did they not? For people taking out new Nationwide products:

Please note: any mortgage products reserved on or before 29th April 2009 will revert to the Base Mortgage Rate (BMR). If you choose to switch to a new Nationwide mortgage product, the new product will revert onto our Standard Mortgage Rate (SMR).

whilst the SMR has no upper limit or cap