One of the comments on Mortgage Strategy Online the previous week described Bank of Ireland’s increase on the differential it charges tracker customers a disgrace.
Around 7 per cent of Bank of Ireland UK mortgage customers will be affected by the changes to the interest rate differential, over 50 per cent of which are buy-to-let holders.
For buy-to-let borrowers, the rate will jump from Bank of England base rate plus 1.75 per cent to rate plus 4.49 per cent from 1 May.
For residential borrowers, the increase will be applied to in two separate stages. From 1 May, it will rise from base plus 1.75 per cent to base plus 2.49 per cent. From 1 October, it will then be subject to yet another increase, taking it to base plus 3.99 per cent.
I couldn’t agree more, but for those under the impression it does not lend in the UK, it does via its link with the Post Office.
I was on London all day on Tuesday this week. In the morning the Post Office had a massive advert in the Metro advertising its rates, many around 2 per cent, for new borrowers and in the evening it had the same advert in The Evening Standard.
To the FSA I ask you this – how is this Treating Customers Fairly?
This is a complete disgrace. How can it blame the cost of funding as the reason why it has to increase its interest rates with existing customers and then on the same day offer new customers considerably better rates.
Today, I phoned Bank of Ireland to ask what rate I could have as an option to the SVR on my own mortgage. It told me 6 per cent! When asked why I couldn’t have one of the published ones with the Post Office via them they answered, “because you can’t!”
This is what your customers are hearing as a result of mortgages that we arranged in good faith.
The news that Bank of Ireland is changing the differential for 13,500 tracker customers made me glad I am that I have retired from this industry, full as it is of organisations completely lacking corporate integrity.
I always used to say to my clients” This is a rip off industry. My job is to get you the least rip off deal”. Even so , I am shocked to see a lender rendering its offer letters worthless.
The apologists for the lenders are clearly comfortable dealing in a world without integrity.
With regards the recent news that Bank of Ireland is writing to 13,500 of its buy-to-let and residential customers on tracker mortgages to warn them of plans to more than double the base rate differential it charges them, can mortgage intermediaries be blamed for not explaining these conditions?
Well over 50 landlords have already left comments on one forum since a BoI customer posted a cry for help after opening his post last week. He has 10 affected mortgages.
If would appear from subsequent posts that only mortgages before 2004 are affected, something to do with a change in regulation and also the banks terms and conditions.
Apparently the FSA has said it is not interested as buy-to-let isn’t regulated, but those affected are furious at this as banks are regulated and one of the FSA’s guiding principles is Treating Customers Fairly.
It apparently costs a bank £500 to deal with each case submitted to the Financial Ombudsman Service, it cost the complainant nothing.
See where this is going? Several posters on forums have said they are submitting one complaint for every affected mortgage.
There is also talk of a class action against BoI based on unfair contract terms on the grounds that it was not clear in their marketing or their offer letters that the “differential” could be varied.
This breaches advertising standards rules which state that such matters must be “clear, fair and not misleading”.
The clauses the BOI are relying on are buried deep into the small print in a mortgage conditions brochure and appear to conflict with the basis of the terms in their mortgage offer letters.
I have no sympathy for the people mouthing off about Bank of Ireland’s decision to change the differential on their tracker mortgages. They have been very very lucky. At the time they took out these rates the BBR was 5.5 per cent and expected to rise. They expected to be paying 5.5 per cent, they budgeted on this and have saved £ 500 per month for a £200,000 mortgage every month for four years. Lots of other people are mortgage prisoners paying 4 per cent SVR and Abbey nearer 5 per cent SVR.
This was not some superb judgement by these people, it was a fluke, a one in a million and the lenders would never have pegged the follow on rate to Bank base rate plus 1 per cent or have a lifetime tracker at base plus 0.5 per cent if they had any clue rates would tumble to 0.5 per cent for four years, likely to be seven to eight years before this madness ends.
So I have no sympathy with them and hope all other lenders follow suit and being purely selfish, this will help the remortgage market.
While I thought the recent Mortgage Strategy Awards last month was a brilliant do with many worthy winners and lots of positive energy, the thing that really cheered me was the amount of new blood on display. Having been in the mortgage arena for 24 years thus far and used to seeing the same familiar faces at every event I attend, the MS awards really inspired me as there was so many young new faces in attendance.
When you think about it, it’s not that long ago when broker numbers were in steep decline and there was a question mark over the role of the broker in the future, with comparison sites, supermarkets and solo banks trying to undermine us at every turn.
Dual pricing was also a major issue and banks were recruiting advisors to sell directly through their branch networks
Fortunately firms rallied round, the mantra was keep the faith and Mortgage Strategy has regularly reported on green shoots at every opportunity.
Eventually the role of the broker was acknowledged as the best route to market and voila, we are back with a vengeance. The key now is keeping those new faces in the industry and to help them to have a rewarding career like we have had. They will be tasked with inspiring the next generation in years to come and hopefully our grand children will recognise the phrase mortgage broker when we get asked what we did before we retired.
The figures out from the Bank of England last week showed that despite participating lenders drawing down £13.8bn from the scheme since August last year, net lending was -£2.4bn in the fourth quarter.
But I would argue that FLS should not be for residential loans.
It should have been directed at commercial lending and only where a lender can show an increase in lending.
Much of the residential money seems to have gone to lenders simply offering cheaper remortgage deals for prime business – in other words, less than 60 per cent LTV.
All commercial lenders have tightened their criteria with many cases now unable to pass credit.
For example, NatWest will lend only around 2.5x where this needs to be nearer 5/6x.
We need these banks to be encouraged to lend more and so help UK businesses grow. Jobs and housing confidence will then follow.
Building houses does not stimulate growth, it is a reaction to it.
If you looked closely at the 39 lenders that have now signed up to the Bank of England’s Funding for Lending Scheme you would have noticed how few have actually drawn down funds.
Perhaps the Bank should look at the phenomenally bureaucratic procedures a lender has to go through before funds are allocated.
I know of one lender that has had one of its IT staff almost full time for the last four months trying to set up the reports that the Bank wants. It is a joke
When the Funding for Lending scheme was first announced I had my doubts. I think our exact words were that schemes like this “go on to fail because the lending conditions aren’t in the interest of business”.
Let’s be fair to the banks; if you get billions through quantitative easing and can then buy Government bonds, you can make good money – so why not offer the tightest terms for SME to reduce your risk and to increase your profit.
The first statistics are now out and it seems that the scheme is not as widely used as was originally suggested.
So the reason it hasn’t worked is simple – banks are in fact lending, albeit on restrictive terms and with many hurdles – but after you have overcome the hurdles, business finance can be obtained. So with the right planning and with the right professional support businesses can obtain finance
And this is where the other reason comes into. Most SME’s don’t want to expand or invest in a business. Our statistics confirm that whereas five years ago there were many business owners looking for finance, now there are hardly any.
Instead of introducing new schemes, we would like to see an improvement in the overall business environment, because that will ultimately motivate businesses to expand and borrow more money.
ASC Finance for Business