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Skipton to scrap SVR ceiling and hike rate

Skipton Building Society is to scrap the ceiling on its standard variable rate meaning it will rise from 3.5 per cent to 4.95 per cent from March 1, Money Marketing understands.

The lender will temporarily remove its ceiling, which meant that customers would never pay more than 3 per cent over the base rate.

It is understood the lender is blaming unprecedented market conditions for the move and that it plans to reintroduce the ceiling rate once market conditions improve.

Skipton has also made amendments to their arrears payment charges. Previously, the lender charged a monthly fee of two per cent of the arrears balance, up to a maximum charge of £100.

Under its new arrears charging policy, customers will pay a flat fee of £40 per month, from the first month they go into arrears, rather than from the second month in arrears as they did previously.

Skipton Building Society head of credit management Carole Cox says customers have been written to, explaining the changes and that the change to arrears charges means that many borrowers will pay less.

She says: “We continually review our arrears management processes to ensure they reflect current best practice and remain appropriate to the needs of our borrowers and our business.

“Whilst it is true that  following our most recent review the new flat fee of £40 is being charged  at month one rather than in month two as it was previously, it does not rise in line with any further increase in arrears as the old percentage fee used to  and reflects the work which is undertaken at the very early stage of arrears where a proactive approach is taken by the society to ensure our borrowers are helped back on track as soon as possible.

“This means that many of our borrowers will be charged less, not more.”

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Comments

There are 50 comments at the moment, we would love to hear your opinion too.

  1. One way to lose your loyal customers who have been waiting to come off a fixed rate for months and benefit from low interest rates…..
    Good-bye Skipton

  2. Will they be the next Society to need rescuing?

  3. It is about time interest rates were increased. Mortgage debtors are the minority of this country. Savers are the majority. I shall be putting my money in the Skipton.

  4. just goes to show lenders are trying to make as much profit whilst they can.

    surely a maximum of 2% above base should be the norm for SVR’s. can they not make a profit on this!

  5. Howard Alexander 20th January 2010 at 6:11 pm

    This is outrageous. A sudden increase amounting to a 42% rise in mortgage costs for previously loyal customers??? Skipton need to have a rethink and apply this only to new customers otherwise we will leave in droves

  6. Others to follow suit shortly…?

  7. I think you will find that skipton will not be borrowing money at the 0.5% base rate. They will be borrowing this money at a much higher rate hence why the need to increase their SVR.

    If you can not afford a mortgage at 5% should you really have a mortgage??

  8. All Skipton mortgage offers state that the SVR will not exceed 3% above BOE base rate. This is not inforceable. Mortgage customers should refuse to pay the increase and refer the lender to their own mortgage offer.

  9. How can Skipton change a mortgage condition thats states the maximum is 3% over the Bank of England rate. This is illegal and not inforceable. Not a small increase either ….42% hike,,, Thats treating customers very fairly Mr FSA.

  10. IFA.

    I think you will find that the offer states in exceptional circumstances, as an IFA you should know what exceptional circumstances means. If not then check the bank of England website and start re-training. As a loyal saver who has had to suffer low interest rates over the past year I am happy that this is happening

  11. Exceptional circumstances…. have they been bailed out, No. Charging more, 42% more hiding behind a clause in the mortgage offer. What exactly does exceptional mean in this situation?

    Does this mean the deposit rates will be going up 42% as well?

  12. IFA… first you were advising people not to pay due to a clause in the mortgage offer, now you are claiming that SBS are hiding behind one?

    it is quite obvious that exceptional relates to low mortgage rates and higher savings rates which clearly goes against the building society model and could never be sustained!

  13. Exceptional circumstances taken from the bank of England website.

    1. Base Rate is less than or equal to 2.7%; or

    2. Base Rate minus the UK average Branch Instant Access savings rate (as published monthly by the Bank of England) is less than or equal to 2.5% for each of the three preceding months.

  14. @IFA’s comment – savings rates have already effectively gone up 42%, compared to the margin they were above BBR a few years ago.

    @Anonymous #4’s comment – obviously they cannot make money on BBR+2% when savings rates are typically 3% – 5%. Do the math!

  15. Buy to let borrower 20th January 2010 at 6:54 pm

    This increase will also be applied to all buy to let mortgages held with Skipton that are SVR linked. There is going to be alot of litigation and arrears caused by this unless SBS back down.

    The Ombudsman and Office of Fair Trading will need to look into this.

    Many families who are currently making ends meet will have serious difficulties meeting an increase at this level.

  16. Good news for brokers…..This is a great chance to discus remortgaging.

  17. Exceptional circumstances. What rot!

    The Skipton are obviously in trouble. For those who think that the savings rate will rise in unison, think again.

    This sets a dangerous precedent and completely betrays the FSA TCF policy.

  18. Would YOU lend money to the Skipton BS at 3.5%?
    Thought not.

  19. John Craig Jones 20th January 2010 at 9:59 pm

    Banks cause the problems..
    Govt impose a levy fee based on the size of SAVINGS book.. not the risk the institution takes…building societies like Nationwide and Skipton get hit the most. Govt then lend cheap money to banks whilst the prudent companies, like Skipton I assume use their savers money.. so they HAVE to keep an inflow and retain savings.. which results in paying over the odds on savings.. which increases their cost of funding. On the back of this they are faced with rating agencies trying to downgrade them if there not well capitalised (hence trying to keep savings high and make no margin) AND the govt throwing money at best buys last year with national savings. Skipton are in my opinion simply trying to create a level playing field.. its not their fault the govt has messed up.. the banks have messed up.. and they have had to do this. Its a great move and when others follow, which the likes of the nationwide will, we can see the re-mortgage market start again. oh for others like Skipton who are upfront with the reasons why they do things. I for one can only applaud them. If it was your business, what would you do!!! As a mortgage broker and IFA I can only shout HURRAY!!!!!!!!!

  20. The comments about clients leaving the Skipton – where on earth will they go?? It will cost them more to move in terms of hassle and pounds shillings and pence (remember those?). The Skipton have done what theyve done becasue they can – do you think they care for one minute……..as soon as mortgages start to flow the competative edge will return. As for now, lenders will lend at any rate. I recently took a car loan amount to 20% of the new car value and was charged 8.45%. Until the FSA can be bothered to check the banks and building socities, they will continually do what they do becasue put quite simply, THEY CAN!

  21. Maybe the Scarborough should have taken over the Skipton. This is literally robbing Peter to pay Paul. I am now going to remortgage after many good years at the Scarborough. Thanks.

  22. This really is only the beginning folks. The base rate is meaningless now particularly for smaller institutions as their funding costs bare no relationship to it.

    The MPC has effectively lost control of market rates. As their continued refusal to comply with their mandate continues and inflation carries on rising this issue will only get worse.

    The “real” (inflation adjusted) base rate is currently 3.3% NEGATIVE on an RPI basis. No one is going to lend money at that rate. They would be paying to take the risk of lending!

    This can’t go on.

  23. Mortgage Broker N3 3HP 21st January 2010 at 7:32 am

    Its a very sad day for Skipton borrowers – these shocking practices should be outlawed.

    However, this is even more of a reason for borrowers to seek independent advice from brokers to see if they could remortgage to a better deal – many lenders are offering rates below 3% where LTV is above 70%>

  24. this is absolutely disgraceful, short of saying, “we originally drafted the terms and conditions because we thought they would tuck up our customers, and when we realised we might get tucked up, we thought we’d get our own back” they are just having their cake and eating it, and that numptee that says savers are the majority is wildly mistaken. fact

    and to this guy

    “”If you can not afford a mortgage at 5% should you really have a mortgage??””

    they may not be able to afford it, but that may be why they signed up to the kind of mortgage they did in the first place, and the very fact that they signed up to those T&Cs in the first place should show this is both1)unfair 2)unenforceable and 3)downright greedy…. All customers should remove their savings and let this institution go to the wire!!!

  25. I think some lenders are stifling any recovery and moves like this are only their to strengthen their financial security and not for the benefits of its members. If you see any real shift in savings rate in line with this change I will eat my hat. Mutuality is a lie.

  26. Up until 12 months ago most SVR’s were 5% plus, its only recently that rates have gone below 4.5% so I stick by my comment that if you cant afford a mortgage at 5% then perhaps you should get a smaller mortgage or not have one at all.

    And why would any saver want to remove their money, its not effecting them in anyway. I think you need to get a grip

  27. I have a two year fixed 3.8% savings rate with Skipton on a Cash ISA with no notice, just having come off a 6% 2 year fix with them. At least the Skipton are paying a reasonable amount on savings, rather than the £14 interest my retired mother in law got on £10000 in the Abbey last year. Why would savers want to withdraw their money from the Skipton and send them to the wire, as the previous correspondent proposes?
    It is good to see an institution who are actually making it worthwhile to save and there are 7x more savers than borrowers in the UK after all.

  28. I think IFA v anonymous #4 are husband and wife who are going through a pretty nasty divorce judging by the bickering between them.

    I agree with IFA that if Skipton are to renege on the terms and conditions of clients formal mortgage offers then exceptional circumstances should mean just that!

    Define “Exceptional Circumstances”

  29. Skiton always lent at the higher end of the risk spectrum and surprise surprise they are in a pile of poo and yes the loyal customer who pays on time and never misses a beat suffers, just wait and see how much they charge to leave them and re-mortgage elsewhere when your term is up…..be warned, go now…

  30. The economy is still incredibly fragile at the moment and I am worried that this may send the wrong message to consumers and seriously dent their confidence. The property market rallied last year because of the low interest rate environment. If rates start increasing in any way, it could see the market suffer. Also, if other socities follow suit, we could see more reposessions as a result…

  31. This is what happens when the honest businesses in the marketplace have a competitive disadvantage to the taxpayer backed fraudsters. I fully support the Skipton and am now be considering trasnferring my savings to them on the basis of this news. Good to see someone lending with responsible interest rates, which will now be at the kind of rate the borrowers took their mortgage out at.

  32. “The property market rallied last year because of the low interest rate environment. If rates start increasing in any way, it could see the market suffer. Also, if other socities follow suit, we could see more reposessions as a result”

    Good. Then the opportunity for financially responsible house-buyers to buy at a reasonable price will exist, helping transaction volumes in the market whilst enabling labour and social mobility.

  33. Skipton have to fund lending by paying savers a share of the interest payments; they also have to increase their capital (i.e. savings deposits) and pay out ‘insurance’ for these. I’m afraid that Skipton is just doing what the market is dictating is necessary.
    If you think Skipton should keep rates low, then write to the government and ask them to throw them some tax-payer money; otherwise accept that borrowing is going to get more expensive across the board.
    I agree that anyone that is unable to borrow at 5% should just default now before the rate rises take hold in the other institutions.

  34. Perhaps Skipton has its own definition of Exceptional Circumstances? There must be many definitions, for Example the Bank of England notes in one of its papers that the IMF definition of Exceptional Circumstances is vague.

    Digging deeper, Anonymous tells us that Exceptional Circumstances taken from the bank of England website are:

    1. Base Rate is less than or equal to 2.7%; or

    2. Base Rate minus the UK average Branch Instant Access savings rate (as published monthly by the Bank of England) is less than or equal to 2.5% for each of the three preceding months.

    Looking at point 2, exceptional circumstances must have been with us much more often that we had imagined! Quite unexceptional, in fact.

    I’d like to know where exactly the B of E definition appears on its website, by the way.

  35. The Mortgage offer terms stated in exceptional circumstances they could make changes. The FSA should take them to court on behalf of consumers. What is exceptional? You are now for once getting a good deal, so we want more money out of you, so that your not. Can the consumer just change his own mortgage terms….NO! Everyone should Close their savings accounts and put their money with a business that has more ethics. Con Merchants by any other name.

  36. I quite agree with the idea of scrapping the ceiling, as a foreign corporate investment management guru I spend a lot of time investinging these issues mainly in countries like Zimbabwe and Congo, and it has worked there.

    Also may I add, this is a well written article by Mr Thomas, not read an article from him before?

  37. If Skipton are in such trouble that this is needed watch out for a raft of job cuts next!

  38. I think those savers who think this is good news and that this hike for mortgage customers will be passed on to savers are very naive..

  39. “I think those savers who think this is good news and that this hike for mortgage customers will be passed on to savers are very naive..”

    I want to transfer my savings to the Skipton on the basis of this news, not because I expect their deposit rate to go up, but because I view their move as ethically sound in charging mortgage borrowers a fair rate of interest. Good on them.

  40. This increase is a disgrace.The Q’s and A’s sent with the bad news indicate there is no intention to pass this rate hike on to savers.It is either total profiteering or are the skipton in trouble?.Either way what are the ‘exceptional circumstances’ in January 2010 compared to January 2009?

  41. I’ve had a mortage with Skipton for 23 years.Currently paying 271.78 per month.Have just been informed this will rise to 602.87!I can’t do anything as I cannot afford to pay off mortgage quite yet.They have me over a barrel.I earn 893.00 net per month,receive no benefits apart from 1 Child Benefit and am ineligible for anything else.What am I going to do?I’m seriously considering just packing everything in as I can’t take much more.I have cancer and struggle to work full time for a pittance but if I were to give up work,I’d not receive anything as I’d intentionally left my job.I’ve worked solidly for 37 years and it’s all been a waste.

  42. Re. the post at 11.11pm last evening. We at Skipton Building Society are very sorry to hear about your situation and would be keen to speak with you to see if there is any way that we can help. Please feel free to call us on 0845 604 6839. Hope this helps, Neil.

  43. I would like to hear from anyone who can give advise on fighting this. I fully agree that exceptional circumstance has been put into contract to be intentionally vague to allow this sort of get out. It does however make it legally difficult to uphold for the same reason.
    For those of you who think that people who can’t afford to pay 5% on their mortgages should think about the people who could pay 5% at the time the mortgage was taken out but are now struggling due to the terrible state of the economy which has in part been brought about by lenders. But then I guess you’re just concerned with the return you’ll get off your fat bonuses.

  44. This action is likely to weaken the Skipton building society: those with lower LTV are likely to remortgage to other lenders, some of whom have rates lower than the original 3.5% SVR. Those with the higher LTV are stuck with the society. The precentage of borrowers defaulting will increase.

  45. From Skipton’s own Q&A webpage:

    What is meant by RECENTly and how would they have defined exceptional prior to the RECENT tests?

    Have the proverbial goalposts been moved?

    The circumstances currently prevailing are exceptional under each of two separate tests, which have RECENTLY been defined by the Society’s Board as follows:

    1. Base Rate is less than or equal to 2.7%; or

    2. Base Rate minus the UK average Branch Instant Access savings rate (as published monthly by the Bank of England) is less than or equal to 2.5% for each of the three preceding months.

    The circumstances will remain exceptional for as long as either one of these tests continues to be satisfied.

  46. I don’t understand how a 42% increase in rate can possibly cause anyone’s payments to increase by over 100% as Anonymous 11:11pm claims.

    And, once again, how on earth did anyone end up with a mortgage they cannot afford which at 4.95% comes to 70% of their net income? Surely, almost without a doubt, the SVR in the KFI when that mortgage was sold would have been calculated at a rate way above 4.95%.

  47. Hi, this decision by the Skipton affects me. I chose my mortgage on the basis of the 3% ceiling about base rate that Skipton had unusually committed to. I was never told that this would not apply if the building society did not like the bank of England’s base rate being too low. Exceptional circumstances might include imminent insolvency of the society or similar. I’d like to challenge this decision as I feel it is unfair. I’m not saying anything against savers, just that this is the contract I took out on my mortgage on with its commitment of a 3% ceiling and I’ve paid higher rates when relevant, it seems unfair that I can’t pay lower rates when they apply as well, that’s why I got a tracker mortgage with the Skipton after all! Problem is I don’t know who to turn to or complain to about this? Can anyone reading this please recommend someone I can go to for advice/ways of challenging the decision?

  48. If this affects you as it does me, the procedure to follow is to (1) make a complaint to Skipton Building Society, and make sure they log your complaint as a complaint rather than just fob you off. They will then have 8 weeks to respond to the complaint, (2) contact the financial services ombudsman on 03001239123 who will issue you with a complaint form. They will rule whether or not Skipton has adhered to its terms and conditions and whether what they cite as exceptional circumstances are really exceptional. You will need the response from Skipton to make the complaint to the FSA Ombudsman, but as soon as you do, send it in with the complaint form. If you can pay the difference it would be better for you, if you can’t the FSA advises informing the Skipton in writing. If the FSA find in your favour and that Skipton has violated its agreement, it will order a refund for any amounts overpaid in the interim. Hope this helps.

  49. I’ve just set up a facebook group for affected borrowers and supporters:
    http://www.facebook.com/home.php?#/group.php?gid=309129390147&ref=mf and a petition: http://petition.zedbox.com/
    Nobody knows about this yet so I’d appreciate any help marketing. I’m a saver who this affects. I’ve sent a complaint to Skipton and am awaiting their final word. If they insist on breaking their pledge I will take the matter to the Financial Ombudsman, FSA and if no joy there I will go to court for a potentially group action (that’s why I’m trying to get affected people together now). A banking lawyer (commenting on one of these articles) has suggested we’d have a 70% chance of success. I would appreciate any help and support or advice from anyone and am very interested in legal opinions! Would also be happy to participate in a news article.

  50. end of the day the rate is still lower than most SVR’s out there most people didnt even know there was a ceiling i didnt a year ago our rate was about 6% on SVR, to the last person setting up a facebook group your a saver who this affects? it should affect your savings for the better in the long run. if you hold a mortgage with skipton i have 1 part fixed till 2012 on 6.04% but a smaller account on SVR they are letting me change to another lender with out any redemption fees for 90 days so i’m going to be better off glad they increased the rate

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