Mortgage Interest rates inreased DUE TO MARKET FORCES

[Bincrunched]

Hi Redfish, a friend of mine has a mortgage with similar circumstances to you ie passed on from GMAC to Dunfermline, their rate has decreased only slightly each time the BOE's rates came down! it appears that when these transferred mortgages took place from GMAC each lender decided to interpret the T&C's to suit themselves!

I received a letter from MAS 5 in response to my query Re: what they meant by increasing the rates due to'Market Forces'

They have apparently passed it on as a complaint to their mortgage administration dept to investigate!

I'm not holding my breath though!! they did say they will respond within 20 days, i'll keep you posted!

I think this is beginning to sound liike a familiar story, neither the lenders or the brokers have properly explained their SVR's or PVR's!

This is the single most expensive purchase in peoples lives yet they don't bother to assist the purchasers by highlighting to them how the rate movements up or down can affect them!!

I do think that the contracts are NOT fair & need to be investigated under the 'unfair contracts' legislation! Thats something I will definitely be looking into!

[zander]

Very interesting thread Bincrunched. We are in a somewhat similar position. We got our fixed rate GMAC mortgage through a broker, then GMAC sold on to Mortgage Express, we moved onto a discounted variable rate after the fixed rate ran out which we assumed was tracking the BoE base rate...we got some cuts passed on then it stopped. Unlike you our lender hasn't increased the amount, but we got annoyed when they stopped passing on the cuts. We complained, and then did some research on their website and publications to back up our arguments - and then wrote a complaint to our MP and to the FOS (after Mortgage Express gave us a pathetically useless reply). We based our complaint on 'lack of disclosure' at the time of signing up. There is nowhere that shows how the lender determines their SVR (and we were not even told it was an SVR, as our lender has another variable rate which is a PVR and we were just given 'a discounted variable rate' - which could mean either).

 

It might be useful for you to collect anything and everything the lender has put out for you to reasonably determine SVR, if that is your rate. Then go at them on the basis of lack of disclosure, once you have their response go to the FOS. It may take several months - we started complaining back in February, then complained to the FOS in March and are still waiting for the FOS to get the lender's response.

 

Having read around these threads though, and another consumer credit support forum, I do think there must be some mileage in the 'unfair' terms legislation, read through this

http://www.oft.gov.uk/shared_oft/bus...act/oft854.pdf

 

What's interesting is now mortgage lenders are required by the regulating authorities to give you a 'key facts' document so you can easily compare products across different companies...presumably because clear and precise information is considered necessary for the borrower to make their decision ... and yet all these lenders are using SVR which is obscurely determined. So you can see there is something here that authorities would find unreasonable... and I don't know what kinds of challenges have been put up on this.

 

If you received full advice and recommendation from a broker, he or she would only provide you with one Key Facts which would be based upon your preferences at fact find stage. If advice was given but no recommendation, you would have been provided with more products for you to make a choice. If you went direct to lender, they can only give you info on their own products.

It's rare indeed to be placed on to a discounted variable rate after coming off a fixed rate. Normally, it would be either back to the lenders variable rate or on to a lifetime tracker. All depends on the offer of loan.

[zander]

Hi Redfish, a friend of mine has a mortgage with similar circumstances to you ie passed on from GMAC to Dunfermline, their rate has decreased only slightly each time the BOE's rates came down! it appears that when these transferred mortgages took place from GMAC each lender decided to interpret the T&C's to suit themselves!

I received a letter from MAS 5 in response to my query Re: what they meant by increasing the rates due to'Market Forces'

They have apparently passed it on as a complaint to their mortgage administration dept to investigate!

I'm not holding my breath though!! they did say they will respond within 20 days, i'll keep you posted!

I think this is beginning to sound liike a familiar story, neither the lenders or the brokers have properly explained their SVR's or PVR's!

This is the single most expensive purchase in peoples lives yet they don't bother to assist the purchasers by highlighting to them how the rate movements up or down can affect them!!

I do think that the contracts are NOT fair & need to be investigated under the 'unfair contracts' legislation! Thats something I will definitely be looking into!

 

Hi bincrunched

 

All the details pertaining to the borrowing are in the Key Facts Illustrations and show what effect a 1% rise in interest rates will have on monthly payments. Brokers should be taking into account a lenders svr along with other factors before recommending that lender to a client.

I see market forces as the cost to the lender of purchasing new tranches for new products. It's the cost of "swap rates" which will cause new products to rise very soon which is why many lenders are not offering svr mortgages any more as they tend to be lower. That is why I asked what your lenders svr is as it could be less than many "mainstream" lenders fixed rate products.

[Bincrunched]

Hi all

 

I have now received a response from MAS no 5.

 

They quote “the reason that the variable rate has increased is because we regularly review our interest rates to make sure we are giving the best deals we can to our customers while remaining financially strong in difficult times. This strength is needed to make sure we can continue to offer you the best rates we can in the future”.

 

It appears that they wish to remain financially strong at my expense – making me financially weak. Sounds fair to me!

Secondly they are basing their current action on the fact that they will look after me later on – how thoughtful!

Thirdly, their woolly answer simply states “Best rates we can” – they may be their best rates but the worst in the market!!!!! – I do like their caring attitude.

 

I cannot see how this response is incorporated within my terms and conditions Para 3.1.

 

I therefore cannot see how they have complied with my contract. I have also noted the following:

 

1) They have historically followed the B of E rate.

2) They have referred to the B of E rate in their previous correspondence when changing interest rates.

3) The LIBOR rate has fallen – so if linked to this the rate would also have fallen.

4) They do not mention their ‘margin rate’ in their correspondence

5) They are not a lender that raises funds via deposits and so do not have the pressure of attracting savers.

 

They go on to quote that the “Current GMAC variable rate is 5.75%”. What relevance has this now? :?

 

They also say “That the standard variable rate is not directly linked to the B of E base rate” - what does this mean – either linked or not?

When rates were increasing – linked

When rates falling – not linked

 

Unfair???

 

Regarding my original contract with GMAC and reviewing the T & C’s I believe it could be an unfair contract. No one, solicitor, broker or the FSA gave me advice or highlighted the way in which the lenders could just change the interest rate to whatever they wanted and whenever they felt like it.

Why stop at increasing the rate by 0.75%? Why not by 1.5% or 3%?

 

In the past lenders seem to be concerned at losing business to competitors. This would keep rates competitive. Not now. It appears that many lenders wish you to redeem the loan asap and some will even waiver charges and pay you to go to another lender.

If there is this view coupled with a break in the link between the B of E rate and their margin it is quite simply only a matter of time before they increase rates so high that if you are unable to leave them and go to another lender you will fall into arrears and eventually have your property repossed.

As one can see this is a very cheap way for the lender to obtain more asset and subsequently cash. Also, the lenders are fully aware that the mortgage market is now much smaller in terms of offers and far more selective than it was just 18 months ago. Unfair ???? Round things in a vice springs to mind!

 

Food for thought here.

I feel I cannot allow this to continue and would appreciate any comments/advice so I can take this forward.

Any ideas anyone as I need to respond to them pretty urgently?

[squidward]

Hi Bincrunched,

 

This is a worry for me I to had a mortgage with GMAC fixed at a rate of 6.29 for two years, In August I leave the fixed deal and go onto MAS5's SVR so far They will not confirm what this rate is. I have been told 2.00% lower and 4.5% I am now worried that this is not going to be the reduction that I hoped and put more pressure on my finances.

 

Do MAS5 publish their rates anywhere ?

 

Squidward

[Bincrunched]

Hi Squidward,

 

Sorry can't help you there, I've never seen their rates published either!

Why would we? It would be too easy for us to work out that they are doing whatever they want with regards to their rate increases

 

regards BC

[Bincrunched]

Hi all

 

I have now received a response from MAS no 5.

 

They quote “the reason that the variable rate has increased is because we regularly review our interest rates to make sure we are giving the best deals we can to our customers while remaining financially strong in difficult times. This strength is needed to make sure we can continue to offer you the best rates we can in the future”.

 

It appears that they wish to remain financially strong at my expense – making me financially weak. Sounds fair to me!

Secondly they are basing their current action on the fact that they will look after me later on – how thoughtful!

Thirdly, their woolly answer simply states “Best rates we can” – they may be their best rates but the worst in the market!!!!! – I do like their caring attitude.

 

I cannot see how this response is incorporated within my terms and conditions Para 3.1.

 

I therefore cannot see how they have complied with my contract. I have also noted the following:

 

1)They have historically followed the B of E rate.

2)They have referred to the B of E rate in their previous correspondence when changing interest rates.

3)The LIBOR rate has fallen – so if linked to this the rate would also have fallen.

4)They do not mention their ‘margin rate’ in their correspondence

5)They are not a lender that raises funds via deposits and so do not have the pressure of attracting savers.

 

They go on to quote that the “Current GMAC variable rate is 5.75%”. What relevance has this now? :?

 

They also say “That the standard variable rate is not directly linked to the B of E base rate” - what does this mean – either linked or not?

When rates were increasing – linked

When rates falling – not linked

 

Unfair???

 

Regarding my original contract with GMAC and reviewing the T & C’s I believe it could be an unfair contract. No one, solicitor, broker or the FSA gave me advice or highlighted the way in which the lenders could just change the interest rate to whatever they wanted and whenever they felt like it.

Why stop at increasing the rate by 0.75%? Why not by 1.5% or 3%?

 

In the past lenders seem to be concerned at losing business to competitors. This would keep rates competitive. Not now. It appears that many lenders wish you to redeem the loan asap and some will even waiver charges and pay you to go to another lender.

If there is this view coupled with a break in the link between the B of E rate and their margin it is quite simply only a matter of time before they increase rates so high that if you are unable to leave them and go to another lender you will fall into arrears and eventually have your property repossed.

As one can see this is a very cheap way for the lender to obtain more asset and subsequently cash. Also, the lenders are fully aware that the mortgage market is now much smaller in terms of offers and far more selective than it was just 18 months ago. Unfair ???? Round things in a vice springs to mind!

 

Food for thought here.

I feel I cannot allow this to continue and would appreciate any comments/advice so I can take this forward.

Any ideas anyone as I need to respond to them pretty urgently?

 

Bump anyone:confused:

[Mark Wilson]

Is this a mortgage or a 2nd charge secured loan.

 

I spoke on the BBC Moneybox programme on Saturday regarding First Plus who have an interest clause identical to the one quoted here.

 

The Beeb have had a compliance expert look at the clause and agree it potentially breaches UCCT regs as the nature of the bargain is so one sided in the way of the lender.

 

The other point they make about needing to protect their own profits is in itself a direct breach.

 

I quote from a post I made on another site:

 

Where a term which merely says that variations will only be 'reasonable' or will only be made 'reasonably', is unlikely to be any fairer than one which contains no such qualification, unless there can be little doubt in a reasonable consumer's mind as to what sort of variation, broadly speaking, such wording allows, and in what circumstances. Where the criteria of reasonableness are vague, or clearly meant to include the best commercial interests of the business, there will be scope for the supplier to change the bargain unfairly to the detriment of consumers, simply on the basis that he needs to protect his profit margins. This is self explanatory and evidenced in the accounts of First Plus.

I have challenged the term with FSA and it is now in the hands of the OFT who I understand are looking at the fairness of the term with regards to a number of lenders not just one. I would stress that you are well served to bring this to the attention of the OFT as the lender is simply using the term to feather its own nest, with noo recourse allowed, it is doing it to protect its margins, it has given the bargain a one sided nature and by doing so is in clear breach of UCCT regs.

Have a listen to the Moneybox recording of last Saturdays recording and the FP bit is about 20 mins in but they presented the argument well, the compliance guy noted the unfairness and stated the loan may be deemed unenforceable if the term remained as is.

[Bincrunched]

Hi Mark,

 

Many thanks for your quick response. Really helpful.

 

I will write to the OFT to highlight the unfairness. Do you know if there is a draft or template anywhere that I can use? In the meantime do I inform the lender of this and do I only make the payments due based on the pre interest rate hike by them or pay them the new increased amount but with some cavet being applied, like 'payment made on account'?

Also can you please let me know how to listen to the recording of the Moneybox programme?

Again many thanks

BC:D

[Bincrunched]

Sorry Mark,

 

Forgot to confirm that it is a mortgage.

 

Regards

 

BC

[Bincrunched]

Hi 42 Man as a site team member, could you please amalgamate this thread with another that has just been created dealing with the same problem and organisation, it may make it easier for other Caggers to follow! thanks

 

Well after much correspondance and questions to MA 5 they have not moved one iota in their stance of increasing their interest rates "Due to market forces" which they have not explained!!

 

Furthermore, they have yet again increased their interest rates!! Thats twice in the last few months!!

Am I missing something here? I don't believe I'm the only one being S*****d like this, but I just don't know what to do!

 

I'm absolutely positive that it's unfair, either by way of the original contract or by their interpretation of it! but I don't have the funds to get into a legal battle with them!!

 

I have continued to pay the original amount, prior to their 1st interest rate increase and have also paid the extra, however I have made it very clear that although I am paying the increases I am NOT in AGREEMENT or ACCEPTANCE of their increased rates and the payment is on 'account only' subject to further investigations!

 

They answered with "If I refuse to pay the increase they would seek a repossession order!"

 

How's that for grabbing your round things in a strong crunch!!!

 

We know that it's unfair but how do we fight these bullies??????

[42man]

I would have a read through the agreement and see what they say about their interest rates and how they are set....and please report them to the OFT too...also did you get this through a broker ?

[42man]

I can't merge this thread with another that isn't yours as the 'story' may get lost amongst other posters....

[Bincrunched]

Thanks for not abandoning me 42Man!!

 

No, I didn't exactly mention Libor rates just in case their response is that my SVR is not dictated to by Libor! You know how they all like to twist & turn!

I have asked them what they mean by "Market Forces"? as this is not highlighted in my T&C's.

Their T&C's state:

3.1 If the interest rate is the SVR we may vary it for any of the following reasons:

(a) to reflect a change which has occurred, or which we reasonably expect to occur, in the BOE base rate or interest rates generally.

 

(b) to reflect a change which has occurred, or which we reasonably expect to occur, in the cost of the funds we use in our mortgage lending business.

 

© to bla bla bla (as Above) in the interest rates charged by other lenders.

 

(d) to reflect a change in the law or a decision by a court; or

 

(e) to reflect a decision or reommendation by an ombudsman, regulator or similar body.

 

Where does it say anything about 'Market Forces' ? :???:

Any views are much appreciated

 

Hi 42 Man thanks for your response:)

 

This is the only reference to interest rate rises I can find in their T&C's Which were given to me by GMAC the original mortgagees! they then sold onto MAS 5. However the T&C's were to remain as per the original agreement!

MAS 5 have chosen to just do as they wish without consideration of what's fair or not! They are interpreting the T&C's in accordance with their own agenda!

 

What's to stop them increasing the rates yet again? Who determines what rate to apply? What happens if they increase to 10% or any figure they choose? Do we just have to accept that!!!! :mad:

 

I'm sooo fed up with having to continually do battle with these organisations! I sometimes feel like I want to run away & live in a tent

[paulagraham]

FYI - in the same annoyed boat!

 

http://www.consumeractiongroup.co.uk/forum/mortgages-secured-loans/222491-mas-no-5-unethical.html#post2467949

[Herron1234]

Very interesting thread Bincrunched. We are in a somewhat similar position .................. We complained, and then did some research on their website and publications to back up our arguments - and then wrote a complaint to our MP and to the FOS (after Mortgage Express gave us a pathetically useless reply). We based our complaint on 'lack of disclosure' at the time of signing up.

 

Hello Redfish,

 

I was interested in your comment about writing to your MP as I am in a similar situation to Bincrushed and others on this thread and I am in the process of writing to mine.

 

http://www.consumeractiongroup.co.uk/forum/mortgages-secured-loans/222548-ge-money-another-problem.html

 

Did you get a response of any kind?

 

Regards,

Herron

[Bincrunched]

Very interesting thread Bincrunched. We are in a somewhat similar position .................. We complained, and then did some research on their website and publications to back up our arguments - and then wrote a complaint to our MP and to the FOS (after Mortgage Express gave us a pathetically useless reply). We based our complaint on 'lack of disclosure' at the time of signing up.

 

Hello Redfish,

 

I was interested in your comment about writing to your MP as I am in a similar situation to Bincrushed and others on this thread and I am in the process of writing to mine.

 

http://www.consumeractiongroup.co.uk/forum/mortgages-secured-loans/222548-ge-money-another-problem.html

 

Did you get a response of any kind?

 

Regards,

Herron

 

Hi Herron 1234

Haven't heard anymore from you since your last post in October 2009. Did you get a response from your MP?

I'm not paying the extra interest monies they saw fit to add and they couldn't give me a definitive answer as to why the increase had taken place at all!!

My reason for not paying the extra was that the account was in dispute. I'm seriously thinking of taking them to court under UTCCR rules.

I gather I'm not the only person this is happening to. A friend told me his mortgage interest has been raised this week by 2%!!!

It took the Bank Of England over one year to decrease the interest rates, yet these monkeys put it up overnight, without adhering to the terms of the contract or even bothering to use a valid reason, except to say there was an increase in the cost of funding! even though Libor is at its lowest rate for a very long time.

 

Iwould really be interested to know what happened in your case.

 

If anyone else has any suggestions PLEASE don't hold back because what the lenders are doing is legalised (maybe!) blackmail! ie pay up or face repossession you mugs!!!

[Redfish]

Very interesting thread Bincrunched. We are in a somewhat similar position .................. We complained, and then did some research on their website and publications to back up our arguments - and then wrote a complaint to our MP and to the FOS (after Mortgage Express gave us a pathetically useless reply). We based our complaint on 'lack of disclosure' at the time of signing up.

 

Hello Redfish,

 

I was interested in your comment about writing to your MP as I am in a similar situation to Bincrushed and others on this thread and I am in the process of writing to mine.

 

http://www.consumeractiongroup.co.uk/forum/mortgages-secured-loans/222548-ge-money-another-problem.html

 

Did you get a response of any kind?

 

Regards,

Herron

 

Hi Herron

 

Well the MP sounded sympathetic and demanded a reply from the CEO of ME, but I had also written to the ombudsman, so she left it to see their investigation. My advice is NEVER WRITE TO THE OMBUDSMAN. They are generally on the side of the banks and when they come out with their opinion you have no leg to stand on outside of court. The ombudsman was told by ME there was a term in the terms and conditions that allowed them to vary the interest rates. So that was the end of that. I don't have a copy of those terms, but as we don't have the same protection as the CCA for mortgages, I didn't pursue it ... if you're not in any trouble with your mortgage provider then it's hard to take them on because we need a roof over our heads.

 

So if you were writing to your MP, I think it's worth it, because the bank would have to reply properly to them, just don't shoot yourself in the foot like I did and write also to any other 'authority'. Funny thing is that before the ombudsman's inquiry the bank never mentioned that term in the terms and conditions when I challenged them and when the MP asked for an explanation. And it certainly isn't full disclosure at the time of signing. But I can't take them on so I can't do anything about it sadly.

 

Good luck!

Edited January 28, 2010 by Redfish