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Buy to Let & LettingFinance

What Does A Mortgage Contract Really Mean?

Today is a bitter day.  Today I have lost my battle against Skipton Building Society.

It is true; I was warned. Banks can do what the F they like regardless of any contract that you sign. It means jack all if they decide they don’t want to honour it.

Fairness? Roll over. That doesn’t exist.

So what happened?

Well you may remember I wrote about it here – it was a letter I received out of the blue from Skipton which essentially would change the key borrowing terms of my 25 year mortgage I had taken on an investment property.

The nuts and bolts were – after the 5 year fixed period had elapsed, rather than a ceiling of 3% above base being applied (as my contract clearly stated) Skipton decided to change the terms due to “exceptional circumstances” and charge what they felt like/ how much they wanted/ how much they needed to fill their coffers.  The rate they decided to charge me was 4.95% – some 1.45% ABOVE the agreed contract rate.

I argued. I ranted. I raved. I sent long letters. I sought out case laws. I contacted a consumer pressure group for a legal class action (details kindly provided by Nick P in his comments on my original blog).

I tried every which way.

I got nowhere.

So I went to the Ombudsman.  This could not be fair. How can it be that a bank decides because market conditions no longer suit them they can just change a 25 year contract?

Well they can. And so the Ombudsman letter tells me – it’s also fair.

And apparently the FSA also agree that what Skipton has done is fair. How is it fair for Skipton to renege on a key contract clause?

Apparently it’s fair because Skipton:

a) Informed it’s customers of it’s decision to breach the mortgage contract

b) Gave customers the “choice” that if they didn’t like this breach then they could leave.

That’s it – you got it, apparently the Skipton’s response “which resulted in a fair outcome for consumers” was the reponse:

If you don’t like it, FUCK OFF

Well, that would be great if I had a choice; I would leave.

But, the mortgage market is a mess. Nobody wants to lend.

So I had no choice, I had to stay with Skipton. For the privilege I also got to pay another 2% arrangement fee for my remortgage (which they were generously allowing me to do).  It wouldn’t feel so big a deal if this was just one property…but there were several.

In “fairness”, Skipton has made a killing out of me – it’s just added £1000s of pounds to every mortgage in arrangement fees and added more to the amount I owe at the end.  Of course, why shouldn’t I feel that is “fair” as the Ombudsman, FSA and Skipton tell me.

But then I am just the muppet who thought that a mortgage contract was a legal document and meant something. More fool me.

13 comments
  1. David Richter

    I remember your original post about this, sorry to hear that it’s not gone your way, seems beyond crazy to me.

    I think most people would be shocked to learn that the banks can behave like this and the the ombudsman feels it’s acceptable.

    I’d have thought this is exactly the sort of scandal that a big media player could get their teeth into. The Daily Mail would have a field day. You never know, it could get some traction and cause Skipton or the ombudsman to change their way (look what’s happened to the Work Experience / Benefits scheme over the past week).

    Don’t give up

    David

  2. Hmolandlady

    This is the kind of underhand practice that will put the fear of God ( or repossession) into other landlords. Thanks for the warning of how UNFAIR the lenders can be and I can only presume it’s been done to achieve income targets.

  3. rich greenland

    I remember your original posting on this too Sam. Perhaps it would also be ‘fair’ if you:

    a) Informed your bank of your decision to breach the mortgage contract

    b) Gave them the “choice” that if they didn’t like this breach then they could stuff it!

    It’s absolutely incredible that a ‘contract’ with a bank can be so utterly useless, and I think David has a point in that a bit of media exposure of this blatant rip-off would be very timely.

  4. David Lawrenson

    If you look up Leon Kaye + skipton renege on google, you can see they reported a case where this lender appeared to give in as long as the borrower did not sek publicity.
    I would be interested to talk to you if you would like to email me via my website.
    Kind regards
    David Lawrenson

    1. David Lawrenson

      Hi Sam (again)

      I guess you are aware of this site:
      http://www.leonkaye.co.uk/skiptonbuildingsociety.html
      However, it seems Leon Kaye no longer handling it.

      I must say, when I first read about this a few years ago, I thought that Skipton surely could not do it (though admit I have not read the detail of the mortgage docs).

      I saw clear parallells with the Foxton case of “repeat letting fees” (Lord Justice Mann ruled on this if you want to look it up) where it was ruled in the highest court that Foxtons could not rely on hidden terms to charge landlords repeat fees on letting contracts.

      The ruling was clear – a firm cannot rely on a term buried in the depths of a contract which was not made clear to the consumer. To do so was ruled to be a breach of the Unfair Contract Terms in Consumer Contracts rules.

      Foxtons and other letting agencies (after much court fighting) finally backed down and accepted the ruling in the court of appeal, as I recall.

      I must admit the Skipton case made me look to own mortgages (none of them are with Skipton) but a lot are on low base rate trackers.

      As I see it, there would be no way any of the lenders could renege (though there does not seem a way out anyway for them, within the small print).

      I always avoid anything where the standard variable rate is not defined as being linked explicity to the BOE base rate. see this link for more comment on this:

      http://www.lettingfocus.com/blogs/index.php/2012/02/longer-term-tenancies-and-getting-the-right-buy-to-let-mortgage/

      I guess the trouble is that the amount of £s involved takes this outside the realms of the county court?

      1. Sam

        Thanks for your blog post link – it’s a great article and truly highlights how much more people/ investors should look into the actual contract they are signing.

    2. Sam

      Thank you David I did as you recommended, this is the action group I contacted previously when a member kindly alerted me to it and unfortunately they didn’t have enough people for the class action to proceed.

  5. Stephen Wilmot

    Hi Sam,
    I’m writing an article on the recent increases in mortgage rates and am thinking of talking about the Skipton thing – any chance I could speak to you about it? Feel free to call on 0207 775 6628 or email me.

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