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

vivatifosi

michaels wrote: »

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.

Mmmmm.... very good point!

michaels

Although this only applies to trackers, the 'max 2% above base rate ' type promises were generally less prominent and so less attention being drawn to get out clauses for such 'promises' perhaps would not need to be so prominent? After all they were probably not the main reason people bought this type of product....

Jonbvn

michaels wrote: »

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

Very good point. Testing the opposite argument is a always a good philosophy for everything from law to mathematics.:T

Clearly this whole issue must be addressed in the courts.

Thrugelmir

Jonbvn wrote: »

Clearly this whole issue must be addressed in the courts.

The fragile state of the lenders own finances may well be the defence.

BOI and WBBS aren't in the best of health.

brit1234

michaels wrote: »

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.

In a normal universe it would be fine, however what has happened over the last 5 year is extreme and I don't know anyone who predicted it.

The terms and conditions on this matter probably be more prominent if this happened time and again. However a 5 year period of effectively negative interest rates due to the QE and funding for lending is not sustainable on a business which relies on attracting savers to make loans. If the cost of lending money is cheaper for borrower than lender can borrow and cover costs then the business is doomed to fail. Hence a T&Cs to change things in extreme circumstances is common sense and standard business procedure since the 90s.

This just stinks of greedy landlords who even with the changes will be better off than pre 2008 and now charging record high rates.

michaels wrote: »

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

Did the Landlords pass on cheaper rents when mortgage rates plummeted? No the rose rents, it goes both ways.

Thrugelmir

brit1234 wrote: »

In a normal universe it would be fine, however what has happened over the last 5 year is extreme and I don't know anyone who predicted it.

That's why the FCA are treading carefully. As the BOE recently told some banks and building societies to increase capital reserves. This can be achieved by lending less or increasing lending margins, thereby generating profit to retain.

The danger with lending less is that it reduces profit as well. So the lenders are being caught between a rock and a hard place.

Loughton_Monkey

This thread got me running to my own mortgage terms [Offset IO mortgage with First Direct]. I must admit to a modicum of ambiguity:

Firstly, on the front page of the contract [the only page which is unique to the cutomer] we have this:

Interest Rate: 4.50% (variable) per year. This rate is variable, which means we may vary it at any time up, or down at out discretion. First Direct guarantee that the variable interest rate on your offset Mortgage, drawn down before 1 January 2004, will not exceed the Bank of England base rate by more than 1% for the life of the loan.

So far, that's pretty clear, for a mortgage converted to Offset on 3/10/2003. But when we get to the attached printed terms & conditions, under "Interest and Account Combination" we get this:

Interest is charged at the rate mentioned on the accompanying Loan Facility Agreement. This is a variable rate which means we may change it. We will give you personal notice of such changes .........

I can take this either as simply highlighting the 'variability' already mentioned in the first part, but I wonder if they mean they could vary the contract with regards to the 1% above Base Rate guarantee?

But finally we get the 'Killer' in the very last printed paragraph 16, headed Variation of Terms.

We may if we wish vary the terms of this agreement but if we do so we shall first give you reasonable notice in writing (which includes statement messages)

I take this as Carte Blanche (legally) simply to write to me with, say, 3 months notice, announcing that they have decided to charge 3% over Base Rate. I feel, however, that FOB or FCA would rule this as out of court, although in extreme financial turmoil, who knows?

It's a bit like saying "If you give me £100,000 for an annuity, I promise to pay you £3,500 per annum for the rest of your life. Unless, of course, I choose to vary that amount at which point I will write and tell you that I have decided to pay you only £2,000......"

Thrugelmir

Loughton_Monkey wrote: »

I take this as Carte Blanche (legally) simply to write to me with, say, 3 months notice, announcing that they have decided to charge 3% over Base Rate. I feel, however, that FOB or FCA would rule this as out of court, although in extreme financial turmoil, who knows?

As an example LloydsHBOS has an overall funding rate for mortgages of around 3%. So any borrower whose interest rate is less than this is costing them money. That's without taking into account any other factors.

Banks and Building Societies operate under very specific statutory laws. So the Directors have a fiduciary duty to maintain solvency.

Contracts have always contained an exceptional circumstances clause. So any borrowers wishing to take High Court class action to contest the fairness will require very deep pockets. The costs will run into hundreds of thousands.

chucknorris

brit1234 wrote: »

This just stinks of greedy landlords who even with the changes will be better off than pre 2008 and now charging record high rates.



Did the Landlords pass on cheaper rents when mortgage rates plummeted? No the rose rents, it goes both ways.

Hey what's that on your shoulder Brit? Looks like an extremely large chip to me.

Thrugelmir

chucknorris wrote: »

Hey what's that on your shoulder Brit? Looks like an extremely large chip to me.

WBBS have singled out BTL LL's with 3 or more properties. Very clever, as won't attract public support. Despite all the media coverage being generated. Many landlords say that they cannot afford the increase. Which is laughable.