Retrospective interest rate hike

oh_well

I'm always baffled by folk that are happy to borrow thousands, but don't understand the possible downsides.

Bottom line is - if you borrow money you take on a risk. A risk is not something that will always end up rewarding you.

For sure he who dares wins, but there's no guarantee.

phillsmit3

I think most people do understand this. Its just annoying and more of a moral issue than any thing else. The svr is allowed to be between 1% and 3% above libor. Libor (the price that the banks get their money for) increases by 0.1 percent and they increase the svr by approx 1.25 percent. Then in the letter issued to customers they blame the rise on the increase in libor! The extra 1.15% just goes straight to their bottom line. Luckily For me its not an financial issue but for some people struggling this kind of thing could push people just the bit too far.

Thrugelmir

phillsmit3 wrote: »

I think most people do understand this. Its just annoying and more of a moral issue than any thing else. The svr is allowed to be between 1% and 3% above libor. Libor (the price that the banks get their money for) increases by 0.1 percent and they increase the svr by approx 1.25 percent. Then in the letter issued to customers they blame the rise on the increase in libor! The extra 1.15% just goes straight to their bottom line. Luckily For me its not an financial issue but for some people struggling this kind of thing could push people just the bit too far.

Suggest you google LIBOR and correct your misconceptions. The way lenders fund their mortgage lending is far more complex than this.

phillsmit3

Forgive if i am wrong and maybe you could clear it up if i am. But libor is the rate at which banks will lend to each other without having to secure the loan. Ie unsecured. And in reality banks could get money from different sources some of which would be cheaper and some of which would be more expensive. For example lending from banks in different countries.

andrewmp

james3333 wrote: »

I had never heard of LIBOR before now. this is pretty scary then if they can jutst up the SVR as they like, they could do that to me next month!?!?
i have only just FOR THE FIRST TIME IN 10 years started to benefit from not being locked into a deal (was fixed in at 5.95% with halifax) now on SVR at 3.5% saving me £140 per month.......could this really just be lost at the drop of a hat?

That's why it's called a Standard Variable Rate. Get a new fix if you can't afford to take a risk.

michellefromessex

I have just returned from holiday to find a letter from derbyshire homeloans showing an increase in my libor rate mortgage, I have only been away for one week and the day of my return an extra £100 came out ontop of my normal mortgage payment which I wasnt budgeting for. Derybshire have quite a record for springing these increases on you without given much of a notice, I think the person on the phone is very used to receiving calls like yours and its nothing to do with royal mail, they just leave it right to the last minute of notifying you, I am used to a change in payment every 3 months, it just would be nice to get a bit more of a warning than say 3 days!!!

Thrugelmir

phillsmit3 wrote: »

Forgive if i am wrong and maybe you could clear it up if i am. But libor is the rate at which banks will lend to each other without having to secure the loan. Ie unsecured. And in reality banks could get money from different sources some of which would be cheaper and some of which would be more expensive. For example lending from banks in different countries.

Its the rate the banks will lend to each other if they wish to. As you say theres no security. Which is why a banks credit rating is so important. During the credit crunch it was partly this that brought RBS and HBOS to their knees in the space of a week. As wholesale markets froze.

Banks can deposit overnight money with the BOE and receive base rate % instead of lending to each other. LIBOR in normal conditions tracks slightly above BOE base.

As an example LloydsHBOS has a mortgage book of around £300 billion pounds. Its not possible to fund this size of funding level on overnight money alone. Lloyds will have various mechanisms to fund this. Retail deposits, long term wholesale deposits (companies depositing large sums for an extended period), mortgage securitisation etc.

RBS is the largest bank in the world. Barclays, HSBC and Lloyds are also in the top 10. So other than Llloyds have considerable international presence.

michellefromessex

I have just returned from holiday to find a letter from derbyshire homeloans showing an increase in my libor rate mortgage, I have only been away for one week and the day of my return an extra £100 came out ontop of my normal mortgage payment which I wasnt budgeting for. Derybshire have quite a record for springing these increases on you without given much of a notice, I think the person on the phone is very used to receiving calls like yours and its nothing to do with royal mail, they just leave it right to the last minute of notifying you, I am used to a change in payment every 3 months, it just would be nice to get a bit more of a warning than say 3 days!!!

Elinor_197

In desperation, I cancelled the direct debit to derbyshire home loans and set up a standing order for the original amount as I didn't have the extra £300+ ; Letter demanding reinstatment of direct debit arrived today so I rang to tell them I am getting advice and pointed out I had paid the original amount I had budgeted for. The girl I spoke to said the date of 29th May "must have been a typing mistake" because the letter was not sent until mid June - confirming my belief that the colossal increase in my mortgage rate WAS retrospective, I said I hoped the call was being recorded and she reaffirmed (twice again) that the letter was not sent in May as dated.
For the record, I'm not just coming off a fixed rate, it's just a massive increase out of the blue

MarieAAP

Nice digging, and gd luck.