Skipton Building Society hikes its mortgage SVR by over 1 percentage point, affecting thousands.
When you're a mortgage customer sticking to your building society's Standard Variable Rate, you expect the rate to move only in line with the Bank of England Base Rate — as it has done for years.
You don't expect it to suddenly lurch upwards when the Bank of England's rate has been static for months.
You especially don't expect the rate lurch when your mortgage lender offered a guarantee that its SVR would never be more than three points over base.
That's why it's odd, unprecendented and downright frustrating that Skipton Building Society has chosen this month to invoke 'exceptional circumstances' and impose a huge rate increase that will affect over 60,000 mortgage customers.
Skipton Building Society's SVR is rising by 1.45%, to 4.95% on 1st March 2010.
The decision is being communicated to thousands of mortgage holders by post. By any measure, 1.45% is a huge sudden increase. Some will face monthly repayment increases of £400 or more.
Imagine having to find £400 extra a month at the stroke of a pen. Even the average mortgage borrower is in line for a £100 increase in interest.
It's a 'realignment' for the benefit of all members, we learn…
…and it's no wonder that Skipton Building Society's website is promoting its Fixed Rate ISA at the moment. Meanwhile tucked away on its mortgage pages are some FAQ (distilled here):
• Why now? — they have defined 'exceptional circumstances' to include phases such as these where the base rate is low (Goes to show: a 'guarantee' is not necessarily a guarantee… have you read all the clauses?)
• Why at all? — to protect savers. Actually, the phrase used is "to enable us to continue balancing the needs of our borrowers and our savers for the long term".
• Why so much at once? — Good question. It seems all those months of restraint had built up into a bubble of frustration. After all, as Skipton repeatedly points out, its SVR is still below average for the sector.
The thing is, although 4.95% for an SVR is by no means bad, I'd love to have been a fly on the wall when they took the decision, presumably overriding any concerns about how individual mortgage customers (who, let's face it, may be fairly stuck in the current LTV climate) would cope with such a dramatic increase.
This is a story we surely haven't heard the last of.
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