Skipton BS faces Legal Challenge over raising rates...

HAMISH_MCTAVISH

Skipton building society is facing a legal challenge over its decision to ignore a mortgage rate guarantee.

The society – which has just over 100,000 borrowers – will increase its standard variable rate (SVR) from 3.5 per cent to 4.95 per cent from 1 March, leaving borrowers on a typical £150,000 mortgage needing to find around an extra £1,500 a year.

Skipton is not the only lender to announce increases in SVR – six others have done so while the base rate has remained at 0.5 per cent. But it is the only one to break a pledge to borrowers that the rate would never be more than 3 per cent higher than base rate. When announcing the increase, the society claimed it was responding to "exceptional market conditions". Skipton's chief executive David Cutter said: "It is a necessary step".

But the law firm Leon Kaye Solicitors claimed the move may be illegal if the economic downturn is not judged enough to trigger Skipton's get-out clause.

The lawyers said: "These 'exceptional circumstances' clauses are normally submitted into contracts to ensure that the lender has an element of control if things turn bad. However, such clauses can fall foul of the Unfair Contract Terms Act 1977."

Leon Kaye has asked Skipton borrowers to contact them if they think they have a claim against the society, but the case could be short-lived, said Melanie Bien, a director of the independent mortgage broker Savills Private Finance. "It all hinges on the definition of 'exceptional circumstances'," she said. "I would have thought this law firm will struggle to successfully challenge Skipton." However, Ms Bien accused Skipton of not treating customers fairly. "Lenders shouldn't offer the guarantee if they can't stick to it."

http://www.independent.co.uk/news/business/news/skipton-faces-legal-challenge--to-rate-rise-1907556.html

Excellent news.

Now theres an anti-bank and pro-consumer campaign Martin should be getting behind, instead of the far less morally/legally clear unauthorised overdraft charges issue.

Skipton promised a rate cap, and then broke their promise for no other reason than they thought they could get away with charging more when the going got tough.

Low base rates should not be considered "exceptional circumstances".

Particularly when low rates are here to stay for quite some time.

mystic_trev

Old news

http://forums.moneysavingexpert.com/showthread.html?p=30044545#post30044545

HAMISH_MCTAVISH

mystic_trev wrote: »

Old news

http://forums.moneysavingexpert.com/showthread.html?p=30044545#post30044545

Different board, so I didn't see it.....

Still, it's good to see Martin IS actually supporting this, and it seems to be turning into a bit of a campaign, with the Lib Dems coming out strongly against it.

Martin Lewis, MoneySavingExpert.com founder, says: "This sort of irresponsible rate rise destroys any faith the public has in the mortgage system. What's worse, is that it comes from a mutual, not a bank.

"I suspect there is little regulatory or legal recourse yet Skipton's members should put pressure on the board. Do they want people making these decisions to run their building society?"

Well done Martin.

Charterhouse

There is an exceptional circumstances clause. Base rates of 0.5% for an extended period are exceptional. No question.

mystic_trev

Basically the Skipton are 'damned if the do and damned if they don't' If they can't envoke the 'exceptional circumstances' they and many other BS's will go out of business. Not a very good way to increase lending.

doire_2

HAMISH_MCTAVISH wrote: »

http://www.independent.co.uk/news/business/news/skipton-faces-legal-challenge--to-rate-rise-1907556.html

Excellent news.

Now theres an anti-bank and pro-consumer campaign Martin should be getting behind, instead of the far less morally/legally clear unauthorised overdraft charges issue.

Skipton promised a rate cap, and then broke their promise for no other reason than they thought they could get away with charging more when the going got tough.

Low base rates should not be considered "exceptional circumstances".

Particularly when low rates are here to stay for quite some time.

Im sure you give a damn about those affected

chucky

it's quite simple the Building Society business model doesn't function with these low rates

abaxas

The issue is that ALL mortgages, infact most financial products have the lovely 'change in cicumstance' clause.

Ie if anything changes you have to tell your lender, I bet no-one told them when then took out a car loan etc etc.

Ie the contract is always in favour of the lender.

HAMISH_MCTAVISH

doire wrote: »

Im sure you give a damn about those affected

I'm sure you don't.

Sir_Humphrey

Well, Skipton borrowers can have a higher SVR or Skipton can go bust and have their mortgages sold on (at a higher interest rate still), or as a worst case called in.

It's not as though borrowers have been hard done by over the last 12 months.

HAMISH_MCTAVISH

Sir_Humphrey wrote: »

Well, Skipton borrowers can have a higher SVR or Skipton can go bust and have their mortgages sold on (at a higher interest rate still), or as a worst case called in.

Funny how Lloyds and Nationwide are managing to honour their 2% caps just fine, but Skipton can't honour a 3% cap.....

It's not as though borrowers have been hard done by over the last 12 months.

It's not as though lenders have been hard done by either, with bank and BS margins at record highs.

But having a lender break a promise to cap a mortgage at 3% above base, and instead charge 4% or 5% above base on a whim, is certainly unfair to the borrower in my book.

People took out those mortgages based on a guarantee that bank margin would not exceed a certain level. Skipton tore up the guarantee, and should not be allowed to get away with it. Which would also set a precedent to make all the other small lenders that have done the same reverse their policy.

Bank/BS profiteering makes a mockery of the whole point of having low rates, which is to provide greater discretionary income for households, and permit spending to stimulate the economy.