Skipton Building Society – Super-Hike Mortgage Rate
I have just found out that my mortgage repayments are going up by almost 40% – with no prior notice and no gradual increases.
My mortgage is with the Skipton Building Society, who this week have put up their standard interest rate to just under 5%, which puts it well above the official interest rate set by the Bank of England.
I had always thought that the building societies were fair and dependable and that, for the most part, they would generally follow suit by all offering a similar standard variable rate. However, Skipton has raised the ceiling on its standard variable rate from 3% to 4.9% and are citing that the reason for them doing so is due to ‘exceptional circumstances’.
These exceptional circumstances, I am informed, are the very low set of interest rates consistent over a long period of time, coupled with the fact that the wholesale markets are not reopening, which has produced pressure for the building society in terms of what funds they have obtainable to lend out.
I accept that it is a fact that every lender needs money just now and the competition for savers is intense amongst the edges and building societies. By law, building societies need to keep up more savings than the edges do and seemingly the Skipton building society has said that in order to attract savers, they have had to put up their interest rates.
According to David Cutler, the society’s Chief Executive, it was made clear to their clients in the terms of conditions of the mortgage offer, that although there was a 3% ceiling on their standard variable rate mortgages, the society reserved the right to remove this in exceptional circumstances.
I am adamant that this was not made clear to me when I approached the Skipton for a mortgage and it was certainly not mentioned in the mortgage illustration. The fact that the society can raise its rate above the 3% cap was mentioned in the small print of the mortgage contract, but the circumstances which could be considered as ‘exceptional’ were not.
I would argue, consequently, that the significance of the warning in small print was lost on most of its borrowers and I cannot understand the point of taking out a repayment mortgage with a guaranteed capped rate, if the guarantee method virtually nothing.
According to the news, very few lenders can truly guarantee that their standard variable rate will not be more than a certain percentage above the bank rate, however it is the smaller building societies who are likely to come under pressure to increase their rates. Skipton is the first to enforce such an increase, however it is doubtful to be the only one.
Since the credit crunch, the number of building societies in the UK has dropped by 59 to 51 and as they are doing little in respect of new lending, they don’t have the ability to sell new competitive mortgages.
It would seem that the best rates are with the larger building societies such as the Nationwide, who have truly confirmed this week that they will continue to keep their standard variable rate for existing customers at 2.95%. There are also some edges with similar guarantees, all within the Lloyd’s banking group.
This information however, is of no help to me. My mortgage repayments will increase by over £200 per month from the beginning of March, unless I can remortgage with one of the major edges and thereby incur substantial costs.