Law firm Leon Kaye has launched an investigation into the legal implications of Skipton Building Society’s decision to scrap the ceiling on its standard variable rate.
Money Marketing first revealed last month Skipton’s move to scrap the ceiling rate on its SVR, which had meant borrowers would not pay more than 3 per cent above the base rate.
The society blamed “exceptional circumstances” for removing the ceiling.
Leon Kaye Solicitors says such clauses are normally built in to contracts to ensure the lender has some control but it is investigating whether Skipton could be in breach of the Unfair Contract Terms Act 1977.
Leon Kaye Solicitors’ statement says: “Those borrowers who cannot switch mortgages will be exposed to significant increases in their interest payments despite taking out an SVR for added protection against such rises in the interest rate.
“We are currently investigating the legal implications of Skipton’s decision to not honour the guaranteed rate and whether the downturn in the economy would warrant a trigger of the ’exceptional circumstances’ clause pursuant to the terms of the mortgage contracts.
“Furthermore, we are investigating borrowers’ rights regarding these clauses under the Unfair Contract Terms Act 1977 with a view to establishing whether borrowers have a claim against Skipton.”
A Skipton Building Society spokeswoman says: “As a responsible business, we are in constant dialogue with our regulator. We are not aware of any formal challenge being made but if one were to arise, we would deal with it through our normal procedures.”