Standard Life changing SVR but not due to BOE

MisterC_2

Hi

This is my first post here and I wonder if anyone can help please. We have a Discounted Standard Life Freestyle "Standard Variable Rate". We have been with them for 1 year and the mortgage is discounted for 2 years.

We received a letter this weekend stating that they are increasing the SVR by 0.15%, the reason being and I quote -

Why are we doing this ?

There have been significant changes in the mortgage market in recent months, which has led us to review our Freestyle Standard Variable rate. Please be assured that our standard variable rate still remains very competitive and we will continue to offer you the best flexible products and service over the long term.

Now, every rate rise we have had from them has been due to BOE increases, this I can stomach, however it annoys me that they can just increase the rates because they want to or have taken some internal review on how to make more money !!

I have 3 questions, the first....

1. Can they legally do this ?
2. What's to stop them doing this whenever they like ?
3. I am upset by this and am now considering leaving Standard Life however if I early exit they will happily charge me £8000 for the privilege, do you think the FSA would uphold the early exit fee as they have changed the rate that is not subject to a BOE change and I have always paid on time ?

Thanks for advice from anyone.

edit to add, sorry I see someone else has posted this too, but no reply yet
http://forums.moneysavingexpert.com/showthread.html?t=595270&highlight=standard+life

mountainchrisriver

In answer... sure someone will correct me if i'm wrong!

1. yes
2. nothing
3. you would not be able to get the early exit fee back

this is the problem with taking out a SVR tracker as opposed to a BOER tracker... I know this is probably not what you want to hear...

MisterC_2

That seems to make sense, so my next questions in follow up would be;

1. Will/should this and any other reason for a rate rise for me be clearly defined in my Terms & conditions ? I have scoured them and can not find them.
2. Should the IFA who recommended the product have made this clear to me ?

Thanks again

ManAtHome

Does it mention being linked to LIBOR rate - this the rate at which banks are prepared to lend to each other, normally around a third of a percent over the BoE rate, last few months has been anything between half to one percent over BoE.

MisterC_2

Hi Manathome

Checked for that, there is nothing as definitive in the contract or Terms and conditions which actually spell out what the rate is linked to other than the FREESTYLE standard variable rate, but that is not defined in the contract either ??

I guess I will call them they will say it's okay, I will then write to them they will say its okay, I will write to the complaints about complaints department they will say its okay, I will then send all those letters to the FSA/SFA (I forget which) along with my contract they will probably say yeah its okay.

In the end after all that has happened I will switch providers, I will probably lose some money but they will lose a heck of a lot more by losing my business. As more and more people do it hopefully they will see the error of their ways.

what more can I do ?

Also meant to ask, have you ever heard of this happening before ? I never have ?

ManAtHome

We've had a number of similar posts about other providers (some increasing by over half a percent...) due to LIBOR-linking. Yours sounds about right if they're reviewing every 3-4 months (the really big hits were reviews mid-september when inter-bank lending rates jumped from just over 6% to nearly 7%).

Maybe too much info dept... banks are currently reluctant to lend to each other as nobody really knows how much debt the other banks are carrying. This goes back to how they've managed to lend more and more money without worrying about bad debts - they just sold the debt on to somebody else who were effectively gambling on a low rate of defaults. Unfortunately, loans were VERY over-sold, particularly in the US, and defaults have been much higher than expected, so now nobody knows how much everybody else's default liabilities are. As a result, they are not over-keen on lending unless they get they get a bit of an extra return. This extra return for taking on unknown risk is what's making inter-bank (LIBOR) rates move higher even though BoE rates haven't moved.

Dithering_Dad

I also received my letter from Standard Life over the weekend. Unfortunately the banks can pretty much do as they please with their interest rates unless you arrange a fixed rate or a BOE tracker rate. We're being penalised because of the global credit crunch, so I would imagine the other banks will follow suit shortly. The days of cheap credit are coming to an end and I would advise everyone to start reducing their exposure ASAP by reducing their outstanding mortgage debt.

I have a 3 year discounted St.Life mortgage and I'm saving like mad to overpay it. I've reduced it by a couple of hundred each month, so the slight increase, while annoying isn't really going to impact me. Hopefully by the end of my 3 year discount, I'll be in the position to pay the whole lot off.

Mr_helpful

SVR stands for Standard Variable Rate.
Variable means it can be be altered.
Yes the lender can do it when it likes
I am not sure why the broker should need to give you a free dictionary with the mortgage.

ManAtHome

Mr_helpful wrote: »

fYes the lender can do it when it likes

Yes, but don't we have some regulation - or can lenders just wake up one morning and decide to increase their rates from (eg) 7% to 1,200%..? Could understand that being legal if there was no lock-in (in which case move asap).

dunstonh

Yes, but don't we have some regulation

Not in the way you want it. Variable allows the lender to vary the rate at their discretion.

or can lenders just wake up one morning and decide to increase their rates from (eg) 7% to 1,200%..?

That would be commercial suicide and the OFT would stop it happening on that scale. However, there are no rules to stop them varying it within an acceptable tolerance and the change here is tiny.

Could understand that being legal if there was no lock-in (in which case move asap).

You chose to have the lock in. No-one forced you. I am sure you wouldnt complain if the rates went down and you didnt complain at the discount you were given.

If you needed a fixed rate then you should have gone for a fixed rate. If you wanted a tracker, then you should have asked for a tracker.

I will then send all those letters to the FSA/SFA (I forget which) along with my contract they will probably say yeah its okay.

The FSA do not get involved in individual complaints and would just forward your post to Standard Life.

Standard Life complaints department would tell you politely that you have no case. They neither sold the mortgage to you and they are not responsible for your failure to understand what variable means.

Some complaints are valid but yours doesnt have a leg to stand on.

Should the IFA who recommended the product have made this clear to me ?

The mortgage adviser would recommend the type of product that fits the needs you tell them. If you say you are looking at discounts, they will focus on discounted mortgages, if you want tracker, they will look at trackers. The KFI you were issued (the illustration) would tell you that the rate is variable. Standard life ones are very well laid out and easy to read.

I will probably lose some money but they will lose a heck of a lot more by losing my business. As more and more people do it hopefully they will see the error of their ways.

The lenders wont lose out at all as every lender has products linked to their standard variable rate. You choosing to go on a crusade against one lender who has done nothing wrong isnt going to worry them one bit. Virtually all lenders have a discounted mortgage against their SVR. They tend to be popular when lending is cheap as mortgages were a year ago.

luckyfool

MisterC wrote: »

In the end after all that has happened I will switch providers, I will probably lose some money but they will lose a heck of a lot more by losing my business. As more and more people do it hopefully they will see the error of their ways.

If you leave before the end of your incentive period and pay a penalty of £8,000 then I'm sure Standard Life would be delighted. Chalk it down to experience, tough it out to the end of your discount and then remortgage then. And in future always remember to either take a fixed rate or BOE tracker as opposed to a rate discounted from the lenders SVR.

I always advice clients where they want a variable rate, and the best tracker and discounted rate are broadly similar, that the sensible option is to go for the tracker.