FCA: Bank tracker changes "unlawful".....

HAMISH_MCTAVISH

The City watchdog has written to banks and building societies warning that changing customers' mortgage terms could breach consumer protection laws.

Last month, The Telegraph reported that the Financial Conduct Authority (FCA) was investigating whether mortgage lenders should be allowed to change borrowers’ contract terms after Bank of Ireland and West Bromwich Building Society raised rates for their tracker customers, even though base rate remained steady at 0.5pc.

Many borrowers argued this was unfair because tracker mortgages are designed to track the base rate. West Brom's own marketing literature said: "Tracker mortgages give you the certainty of knowing that the rate you pay will move in line with bank base rate." The FCA plans to publish a discussion paper on the issue by the end of the year.

The FCA's letter, sent today, revealed that a number of mortgage lenders have contacted the regulator about changing their mortgage contracts, including standard variable rates, according to The Times.

The letter, from Clive Adamson, the director of supervision at the FCA, warned such changes could breach consumer law and the regulator's principles for business.

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/10462168/Regulator-warns-tracker-rate-rises-could-be-unlawful.html

Good news for those involved.

Banks should be forced to honour the contracts they made.

:beer:

chucknorris

HAMISH_MCTAVISH wrote: »

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/10462168/Regulator-warns-tracker-rate-rises-could-be-unlawful.html

Good news for those involved.

Banks should be forced to honour the contracts they made.

:beer:

Thanks, nice to know Hamish. I'm on low margin tracker mortgages and obviously would like them to continue while we have a low boe base rate. I would be disappointed if they ended prematurely, although I would try and reflect on the good run that I had had with them.

grizzly1911

The word is "could".

Presumably the letter of agreement contains the ability to vary the agreement in certain circumstances or for circumstances outside their control?

Presumably both parties entered into that contract of their own free will. For a transaction of this nature a solicitor would have been used who should have hilighted any onerous terms and obligations.

The question is whether those contract terms were "unfair".

It seems the government, BOE and regulators can move the goal posts substantially leaving the lenders in a very difficult position.

vivatifosi

HAMISH_MCTAVISH wrote:

Banks should be forced to honour the contracts they made.

grizzly1911 wrote: »

Presumably both parties entered into that contract of their own free will. For a transaction of this nature a solicitor would have been used who should have hilighted any onerous terms and obligations.

Do we know what the small print actually says (as opposed to the marketing literature).

If the banks don't have a way out, then I completely agree with Hamish, they should be forced to honour contracts.

OTOH, if there was a loophole, then I agree with grizzly, people should have read the small print.

I wonder how many people would be affected. The rate for these mortgages rose pretty quickly once it was clear that the base rate wasn't going to rise, so I'm guessing it was a very small time window.

HAMISH_MCTAVISH

vivatifosi wrote: »

Do we know what the small print actually says (as opposed to the marketing literature).

If the banks don't have a way out, then I completely agree with Hamish, they should be forced to honour contracts.

OTOH, if there was a loophole, then I agree with grizzly, people should have read the small print.

I wonder how many people would be affected. The rate for these mortgages rose pretty quickly once it was clear that the base rate wasn't going to rise, so I'm guessing it was a very small time window.

The big lenders such as Nationwide and Lloyds had a guarantee never to raise their SVR to more than 2% above base rate.

This promise was clearly stated in the 'key facts' document in the loan paperwork, and as such has been found so far to be irrevocable.

There are other cases where for example some people paid a hefty loan arrangement fee, often between 2K and 5K, to get a lifetime tracker of from 0.5% below base rate to 0.5% above base rate. The banks appear to mostly be honouring these as well, so far, at least to residential customers.

Almost all mortgages will contain an "exceptional circumstances" clause. The argument appears to be whether or not application of that clause either trumps other promises made within the contract and/or marketing details, or is considered to be treating customers fairly under the standards used by the FCA.

Sometimes the banks have got away with changing them, sometimes not, and it does appear to be down to the wording in the contracts (which often changed over time or with mergers) as a few banks have tried to change and then had to make partial U-turns for some customers with slightly different clauses in their contracts for example, or only applied it to unregulated BTL.

There are several million people currently sitting on attractive lifetime tracker or SVR rates. From what I can see, most of these borrowers could now (although not 3 years ago) actually get a similar rate as a new borrower. But they'd mostly have to keep changing product every 2 years and have to pay fees each time to do so, and expose themselves to higher SVR rates which might apply if the availability of lending worsened again and competition among banks reduced.

Wi88le

If they aren't allowed to raise the rates on these would they just be able to recall the loans?

HAMISH_MCTAVISH

Wi88le wrote: »

If they aren't allowed to raise the rates on these would they just be able to recall the loans?

They are allowed to raise the rates when base rates rise.

That is, after all, the point of a "tracker".

They just can't unilaterally break their contracts before then. And that applies to "recalling" the loans too. In the absence of a breach of contract on the borrowers part, there is no realistic prospect of that happening.

Graham_Devon

HAMISH_MCTAVISH wrote: »

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/10462168/Regulator-warns-tracker-rate-rises-could-be-unlawful.html

Good news for those involved.

Banks should be forced to honour the contracts they made.

:beer:

Isn't your argument normally that the banks should regulate themselves?

Isn't your argument that it was the "nanny state" that created mortgage rationing?

I.e you don't like interference from regulatory bodies or the government.

Yet you are now clinking glasses over regulation interfering with the banks? You seem to want them free to lend more and more, you slam them for offering higher rates on new loans, yet you want to stop them from charging the rates they deem neccesary on the existing deals?

You can't have it all is what I'm saying. You can't have light touch regulation, but complain that banks are trying to make products profitable. You can't have lower new loan rates while wanting to keep loss making existing rates.

Etc etc.

I'm confused by your stance on regulation and the banks. It appears to me you just want light touch regulaton so long as it means mortgage are cheaper. But you want tigher regulation to keep them cheaper.

And secondly, if they can't just break contracts, howcome you stated that the Wilsons mortgage provider breaking contracts (meaning the Wilsons and the mortgage company didnt fold) was the right thing to do?

Again, was your argument based on whatever you felt was good at the time, or do you really believe banks should not be able to break contracts? Therefore leaving you at odds with yourself?

brit1234

HAMISH_MCTAVISH wrote: »

FCA: Bank tracker changes "unlawful".....

This thread is one big distortion of the truth, the correct title of the article is below.

Regulator warns tracker rate rises could be unlawful
http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/10462168/Regulator-warns-tracker-rate-rises-could-be-unlawful.html

So you say its unlawful, the newspaper says could be unlawful. Now the newspaper basses it may be unlawful as customers have written letters to the paper and various groups in a mass lobby campaign. Hardly evidence that it is unlawfull because the landlords don't like it.

Now if we go to the conditions written in their mortgage agreements with BOI and WB they all have clauses which allow them to do this. The borrowers signed these conditions to take their mortgage out, they are legally binding. So in the eyes of the law they are legal.

So really Hamish your thread should be called.

tracker rate rises lawful but landlords don't like it

The facts is the landlords know this and are instead increasingly looking at legal actions against their solicitors for allegedly not informing them of the clause.

HAMISH_MCTAVISH

brit1234 wrote: »

This thread is one big distortion of the truth, .

Your entire posting history is one big distortion of the truth.

On a positive note, it's nearly Xmas again.....:D

michaels

I would have thought, like interest only, the clue is in the name 'base rate tracker'. Thus for a T&C altering this fundamental component of the deal common sense suggests should be in the key facts not the small print.

No one seems to suggest if rates had risen rather than fallen that borrowers should have unlaterally been allowed to rewrite the contracts.