Secured Variable Interest Rate Loan Question

In 2006 we were struggling and took out a large consolidation loan over 20 years with a variable interest rate of 9.9%.For the last 15 years the rate has stayed at 10.52% and never dropped when interest rates were as low as 0.25%.The loan was originally with Picture Loans but has changed hands several times and currently sits with Mars Capital.
This morning we received a letter stating the following:
Although we always strive to provide our customers with a high quality service,we have recently identified that unfortunately we haven't always complied with the requirement to apply a fair and reasonable variable interest rate to your account,in line with the terms and conditions of your agreement.As a result,we are carrying out a remedial exercise to place your account in a fair position,reflecting general interest rate movements since your account was opened.

Upon reading this I assumed that I was going to be overjoyed but then read that they were increasing my rate from 10.52% to 14.26% from 1st November.
I have requested a copy of the the credit agreement from them and they seemed happy to look into this for me but I am confused at how they can not reduce the interest rate at all during the years of record lows and then quote fair and reasonable as justification for a huge hike especially when then also mention rate movements going back to the account being opened?There is a message on their website saying all their loans and mortgage were being increased by 1.5% this month which is considerably lower than our increase.
Was wondering if there was any advice or insight members might have about this.


  • It sounds as if they are doing two things.

    1. Making an adjustment to your account to reflect that the rates should been.

    2. Informing of a rate increase based on recent rates movement.

    The new rate isn't linked to previous rate adjustments. 
  • MeteredOut
    MeteredOut Posts: 1,055
    First Post First Anniversary Name Dropper
    edited 26 October 2023 at 4:30PM
    OP, have you double-checked that they haven't in fact (retrospectively) reduced your interest charges for periods of time where interest rates were low? It certainly sounds like they intend to do that.

    Do you have an online account where you can check things?
  • Yes,I absolutely understand that with a variable rate loan when the interest rate goes up an increase is likely but it will be interesting to see how they justify not reducing the rate for 15 years as part of their fair and reasonable interest rate policy.
  • No there has been absolutely no reduction of interest rates although that's what I was excitedly thinking when I first read the letter.I am a bit of a novice when it comes to loans and mortgages but I wonder if there is something in their terms and conditions that explains the correlation between their interest rate and the Bank Of Englands.Looking back I can't seem to see much of a pattern.In 2006 the interest rate was about 5% while the variable rate on the loan was 9.9%,When the interest rate was less than 1% for 15 years the variable rate was still 10.52% and now the interest rate is at 5% again they are increasing the variable rate to 14.26%.
  • Jami74
    Jami74 Posts: 982
    First Post Photogenic Name Dropper First Anniversary
    Is there any way you can refinance the remainder for a lower rate? Could you get a 3 year loan with your own bank? 
    Debt Free: 01/01/2020
  • Just a bit of an update on this and another question which might become important.Spoke to the Financial Conduct Authority about this today and although they were very understanding and polite they were incredibly vague stating that they expected lenders to be very fair and transparent which I certainly don't think applies in my case.While speaking to Mars Capital again they stated that they were not responsible for any actions by the previous owners of the loan.Is this correct because if I had defaulted in anyway previously I'm sure they would still want paying?Also I had no say in my loan being transferred to various new lenders so surely my complaint would be with the current owner?I guess my next step will be to wait for their response to my complaint and then contact the Ombudsman to see if they can look into this.
  • What does the original loan agreement say.  Many of those type of variable interest rate deals were an agreed fixed percentage margin above the "usual" variable rate.  In which case you should indeed have seen quite a few potential changes over the years.
  • Thanks for the reply,I have a been sent the original Picture credit agreement which says the interest rate is 9.9% but the interest rate could vary.It says see clause 2.2 overleaf for further information but this has not been sent and the current lender seems unable/unwilling to provide this.If they aren't able to provide the terms I'm not sure what basis they are using to vary the interest rate?
    Having checked the current statement being provided by Mars Capital they states that my rate type is Variable at  SVR + 10.52% and then states the SVR applicable to my account is currently 0.00%
    Totally confused by what this means,isn't the 10.52% the SVR?If it means 10.52% on top of their SVR then surely my initial rate would have been greater than 9.9%?
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