MSE News: Mortgage blow as building society hikes SVR
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I don't have much sympathy for anyone who didn't factor in rates of a lot higher than 5%.0
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I do worry, when building societies feel able to offer 5% fixed bonds/ISAs for five years, that they are going to be paid for by those who can't remortgage.
If people struggle to pay back their mortgages then the credibility of the lending institution takes a dive. The only way win back savers and funds is to increase headline savings rates. This is then passed on, making the SVR mortgage rate higher etc.
J_B.0 -
Skipton BS have cited clauses in their 3% above BoE rate guarantee that talk about being able to remove it in "exceptional circumstances". What I'm wondering is whether Nationwide has some similar clauses, until now I presumed they were bound to their 2% guarantee.
Nationwide does have similar clauses although so far they have said they will not invoke the "exceptional circumstances" clause. To be honest, I am surprised. Base rates at 0.5% are, unquestionably, "exceptional".0 -
Cannon_Fodder wrote: »Trying to push more people onto Trackers, before the Base Rate goes up ?
when is the base rate going up?
did i miss something?Please take the time to have a look around my Daughter's website www.daisypalmertrust.co.uk
(MSE Andrea says ok!)0 -
I think that things must really be bad at Skipton as this simply leads one to avoid skipton as a port of call for remortgaging as bank and building societeis are built on Trust and if you have to resort to an underhand small print to get out of a deal then people best leave thm alone0
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Well it obviously wouldn't work if the general populace knew for certain when the Base Rate was going up, so they have to make Trackers appear attractive for a while beforehand...0
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The rise was 1.45 percentage points, from 3.5% to 4.95%. That's a massive 41% rise in monthly paments for anyone on the SVR - whopping by anyone's standards. Particularly when you thought you had a contract stating that the SVR would never rise above 3 percentage points over BoE base rate.
Even more whopping are the implications for the mortgage market in general. Skipton are not the only BS in trouble - many are finding it impossible to raise funding at anywhere near competitive rates. There's no point the BoE keeping their base rate so low when in practice banks and building societies are not able to secure funding at those rates. 8 building societies have failed so far in this credit crunch - expect many more to follow.
That is just plain WRONG.
For a £100K mortgage over 25 years the repayments are:
£500.62 at 3.5% or
£581.68 at 4.95%
A difference of just 16% rather than 41% that you quote.
And BofE does NOT set rates to please Building Societies. There is a much wider picture that is considered.
The implications are that those lenders who are made promises (explicit or implied) that they cannot keep to large a proportion of their mortgage holders need to 'tempt' people onto new deals. If they fail then they will go bust.
GGThere are 10 types of people in this world. Those who understand binary and those that don't.0 -
Gorgeous_George wrote: »That is just plain WRONG.
For a £100K mortgage over 25 years the repayments are:
£500.62 at 3.5% or
£581.68 at 4.95%
A difference of just 16% rather than 41% that you quote.
She's thinking interest only. It's a sad reflection on our culture that IO is now considered normal.0 -
Hopefully, Nationwide's combination of :-Charterhouse wrote: »Nationwide does have similar clauses although so far they have said they will not invoke the "exceptional circumstances" clause. To be honest, I am surprised. Base rates at 0.5% are, unquestionably, "exceptional".
1) Sheer scale 2) the fact that they introduced the SMR in April 2009 and
3) the huge level of savings that moved their way following the issues with the banks
will mean that they can keep their promises with regards to the BMR. If some members choose to move onto either fixed rate or capped tracker mortgages then that should help things.0 -
Charterhouse wrote: »She's thinking interest only. It's a sad reflection on our culture that IO is now considered normal.
It's he, not she, and yes, I was talking about IO mortgages, which have become more and more common - just have a read of the mortgage board on this forum. So many people would have defaulted on their mortgages by now if it hadn't been for the breathing space afforded by being able to go onto the ultra-low SVR. All that is over now.
You can argue that people should have budgeted for higher rates, but not many people would have expected such a huge rise in one fell swoop. Imagine other borrowers having an equivalent hike - what if the BoE had suddenly put up the base rate by 145 basis points this month? How many people would have been able to cough up the extra money straight away? With the employment situation deteriorating, many people are just scraping by as it is.poppy100
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