The Great SVR Scam on UK Mortgages

nme123

Have you noticed that ALL mortgage lenders are pricing SVR at 3 - 5% above the BOE rate?

They used to price it at 0.5-2% above BOE until they all unilaterally decided 5 years ago to suddenly jack up the SVR and catch people out who are unable to remortgage.
This great Scam should be highlighted and the cartel broken up so that lenders actually compete to offer realistic SVRs, not just predatory introductory rates that expire soon enough leaving borrowers paying 3x more for their mortgage than they can afford. 

Who else is stuck on SVR and how can we get the FCA to break up this cartel? 

lmitchell

I never really understand this argument. Even if someone is unable to 'remortgage' they can still get a new fixed mortgage product significantly cheaper than the SVR with their existing lender, no?

GentleGiant01

nme123 said:

Have you noticed that ALL mortgage lenders are pricing SVR at 3 - 5% above the BOE rate?

They used to price it at 0.5-2% above BOE until they all unilaterally decided 5 years ago to suddenly jack up the SVR and catch people out who are unable to remortgage.
This great Scam should be highlighted and the cartel broken up so that lenders actually compete to offer realistic SVRs, not just predatory introductory rates that expire soon enough leaving borrowers paying 3x more for their mortgage than they can afford. 

Who else is stuck on SVR and how can we get the FCA to break up this cartel? 

Usually the only reason why a lender won’t allow you to remortgage to one of their other products is if you’re in arrears. 

If you’re in arrears even before you switched to SVR, you can’t afford the mortgage and it’s probably wise to find something a little cheeper. 

If you’re not in arrears speak to your lender and they should offer you a fixed product of theirs. 

GentleGiant01

lmitchell said:

I never really understand this argument. Even if someone is unable to 'remortgage' they can still get a new fixed mortgage product significantly cheaper than the SVR with their existing lender, no?

If OP is in arrears this won’t be an option 

nme123

I am a mortgage prisoner.  meaning I cannot prove affordability to move onto a lower rate or any other product, despite paying mortgage perfectly for many years. 

Also my lender refuses to offer interest only products and so I cannot remortgage or fix a new deal with them. 
Stuck on sky high SVR and I am sure Im not the only one...

GentleGiant01

nme123 said:

I am a mortgage prisoner.  meaning I cannot prove affordability to move onto a lower rate or any other product, despite paying mortgage perfectly for many years. 

Also my lender refuses to offer interest only products and so I cannot remortgage or fix a new deal with them. 
Stuck on sky high SVR and I am sure Im not the only one...

I'm so sorry - I underestimated how many people this effects. There are banks out there who may be able to help - ACG on this forum has said a few times there are lenders who will be willing to help - depending on the circumstances.

Are you in negative equity? Or don't earn enough anymore?

This web page may help :

https://www.moneysavingexpert.com/mortgages/mortgage-prisoners/

ACG

There are lenders who will look at Mortgage prisoners on a case to case basis. 

The big question is what makes you a mortgage prisoner? Are you earning an income but it is just a little bit short or are you not declaring your actual income? My experience (albeit limited) is that when you have mortgage prisoners it is because they either self certified an income they never had and still do not or they work in a cash industry and can afford the mortgage they "have a good accountant".

Im not making accusations here, just going off my limited experience of these enquiries. 

As for the SVR, that is a part of your terms. As far as I am aware a lender can only change the SVR in line with the deal you signed up to - usually that would just be to raise or lower it in line with the BoE base rate or something else. So presumably you signed up to this product (including the SVR)? 

Thrugelmir

nme123 said:

Have you noticed that ALL mortgage lenders are pricing SVR at 3 - 5% above the BOE rate?

They used to price it at 0.5-2% above BOE until they all unilaterally decided 5 years ago to suddenly jack up the SVR and catch people out who are unable to remortgage.
This great Scam should be highlighted and the cartel broken up so that lenders actually compete to offer realistic SVRs, not just predatory introductory rates that expire soon enough leaving borrowers paying 3x more for their mortgage than they can afford. 

Who else is stuck on SVR and how can we get the FCA to break up this cartel? 

Few people opt for SVR mortgages in this low interest rate environment. Lenders likewise won't wish to be exposed to massive amounts of variable rate funding if interest rates suddenly rise sharply. 

nme123

the point is that SVR rates have shot up over the last 10 years. Compared to 2000's era mortgages where the SVR would usually track around 1-2% above BOE, now its +4% above.  Q: Why do lenders need such a huge margin above BOE, what is driving this if not greed as surely its not any sense of competition?
A: They have figured out that its better to have a huge SVR to grind profits from those unfortunates that cannot keep switching every couple of years, or to charge high arrangement fees for fear of being caught in SVR misery. 

ACG

If you want to be very matter of fact, the point is that you signed up for a deal. Nobody forced you to. 

Thrugelmir

nme123 said:

the point is that SVR rates have shot up over the last 10 years. Compared to 2000's era mortgages where the SVR would usually track around 1-2% above BOE, now its +4% above.  Q: Why do lenders need such a huge margin above BOE, what is driving this if not greed as surely its not any sense of competition?
A: They have figured out that its better to have a huge SVR to grind profits from those unfortunates that cannot keep switching every couple of years, or to charge high arrangement fees for fear of being caught in SVR misery. 

Bradford and Bingley were the first UK mortgage lender to adopt the US model of debt securitisation (1996 if I recall correctly).  Used to the extreme by Northern Rock through it's shadow entity Granite. Both lenders of course ended up having their mortgage books nationalised. Since the GFC the BOE in conjunction with the Treasury have provided a number of support schemes to allow Banks time to deleverage their balance sheets. Speed forwards to the current day and the era of cheap money is coming to a close. Market forces will again influence the cost of money and correspondingly interest rates. The magic money printing pressess are being retired.