Abbey rate increase - should i persue?

crum

Hi,


Please forgive me if I am misinterpreting information I have read......


My partner took his mortgage with Abbey out in January 2007 on a 5yr tracker deal, £2,336 fees added to the loan (yuk!).


Abbey increased their SVR cap significantly and he was barely able to feed himself & was only paying his mortgage and council tax, everything else was left to go into the red!


He was of the understanding that he was 'stuck' on this rate unless he paid the early redemption cost of £7,051.80.


If my understanding is correct, he should have been given the option of transferring to another rate or being able to remortgage penalty-free within 3 months of the increase due to the substantial increase? If that is the case, I feel unclear information was given about this.


I would very much welcome any clarity anyone may be able to give and whether it is worth pursuing?


Kind regards
Crum.

Thrugelmir

A tracker with a redemption penalty? That's somewhat unusal. Are you sure?

Tracker mortgages are tied to BOE base rate or another measure. Not normally the lenders SVR rate. Besides which while interest rates rose briefly in 2007 thereafter they went downhill.

Sounds as if the recollections from the past have become rather muddled.

crum

I've double checked the original mortgage offer - definitely says early redemption penalties apply until 03/01/2002.

dunstonh

Following on from Trugelmir's comments about trackers......

Was it a tracker or a discount mortgage? Discount mortgages usually have a tie-in period and are usually linked to the SVR.

I've double checked the original mortgage offer - definitely says early redemption penalties apply until 03/01/2002.

Is that the same mortgage as you say in post #1 that it was taken out in 2007.

crum

dunstonh wrote: »

Following on from Trugelmir's comments about trackers......

Was it a tracker or a discount mortgage? Discount mortgages usually have a tie-in period and are usually linked to the SVR.



Is that the same mortgage as you say in post #1 that it was taken out in 2007.

Sorry, that was a typo...should have been 03/01/2012.


Description of interest rate: A variable rate which is 1.54% above the BofE repo rate.

Bermonia

As you have referred to it as a 5 yr tracker then that would mean it was a discounted rate for those five years and as such would’ve been subject to early redemption fees- fairly standard.

With regards to the rate increases, tracker rates historically were lower than fixed rates, however it was on the basis of taking an educated risk in terms of potential rate rises.

Thrugelmir

crum wrote: »

Description of interest rate: A variable rate which is 1.54% above the BofE repo rate.

There's no reference to SVR there.

The mortgage would have defaulted onto SVR in 2012. What action was taken then?

crum

I wasn't sure if the SVR was connected to the BofE which is why I was querying it before I went any further :-)


Since 2012 he went on SVR until 2016 when he then went onto a fixed rate for 2 years and then remortgaged to Halifax last month. He is now (finally) on a repayment mortgage after being on an interest only mortgage prior with no repayment provisions.

LennyInSummer

Just one thing Crum.

If your partners mortgage was advanced by Abbey in early 2007, its likely their Standard Conditions booklet for that tranche of lending was still using the 2006 or 2005 version

It's something of an open secret that Abbey shot themselves in the foot by creating a contractual obligation for themselves to notify borrowers of an increase in their 'margin cap' (the maximum margin above the reference rate that the SVR was allowed to fall within.

A lot of borrowers were never sent the the margin cap increase notification and the subsequent SVR variations are therefore arguably void (though it does not always leave you in a better position to argue this).

I'd send a SAR to Santander and ask, specifically, for evidence of letters sent to your partner pursuant to condition 10.7 of the Abbey Mortgage Conditions. Also ask for a copy of the conditions booklet.

A lender cannot, easily, charge you an ERC if you are on the SVR.

Schedule 2 of the Unfair Terms In Consumer Contracts Regulations 1999 provided an indicative list of prima facie unfair contractual terms, one of which is a term that:

(j) enabling the seller or supplier to alter the terms of the contract unilaterally without a valid reason which is specified in the contract;

This provision is further clarified at S.2 (b) of Schedule 2:

Paragraph 1(j) is without hindrance to terms under which a supplier of financial services reserves the right to alter the rate of interest payable by the consumer or due to the latter, or the amount of other charges for financial services without notice where there is a valid reason, provided that the supplier is required to inform the other contracting party or parties thereof at the earliest opportunity and that the latter are free to dissolve the contract immediately.

The 'dissolve the contract immediately' bit is important. Quite a few lenders have fallen foul of this by charging an ERC whilst the borrower was on an SVR.

LennyInSummer

Sorry Crum,

Didn't read the above properly.

'I wasn't sure if the SVR was connected to the BofE which is why I was querying it before I went any further'

Abbey's lending was 'linked' to the BR in the sense that their fixed 'margin cap' allowed them to charge up to a specific amount above the BR.

Their reversionary rates were therefore technically Standard Variable Rates because the rate they charged was discretionary - though that discretion was constrained by how high the margin cap sat above the Base Rate.

If Abbey told your partner an ERC would be payable after the reversionary rate had kicked in - i'd have a serious look at it. If they only said the ERC would be applied during the 5yr introductory period, this is normal practice.

The difference is important.

Thrugelmir

crum wrote: »

I wasn't sure if the SVR was connected to the BofE which is why I was querying it before I went any further :-)

There's a link in that lenders will revise savings and borrowing rates upwards and downwards as BOE fluctuates. However there's no direct correlation to BOE base. Other than lenders will wish to be competitive in their own target market segment.