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FOS sees rise in SVR related complaints

The Financial Ombudsman Service has seen a 2% drop in mortgage related complaints for the year to March 2010, but complaints relating to lenders’ SVRs have increased.

Disputes relating to interest rates have been a significant feature of its mortgage-related complaints, consumers have complained about standard rates set by lenders, rates not tracking changes in the base rate, the speed of changes made to variable rates, and the removal of interest rate “collars” by some lenders in response to exceptional market conditions.

It has also reported an increase in complaints about the suitability of fixed-interest mortgages, where consumers believe that a mortgage linked to a discounted or tracker-rate should have been chosen instead.

In its report FOS, says: “We will consider carefully the legal fairness of interest-rate variation-terms in mortgage contracts, where this forms part of a complaint brought to us by a consumer. In the complaints we see, consumers often expect variable interest-rates to track the base rate – but this is often not a term of the mortgage contract.”

Payment Protection Insurance dominated the list of complaints to FOS, with some 30% of new cases during 2009-10 relating to PPI.

But during the year mortgage-related complaints were down from 7,607 to 7,469.

FOS upheld 48% of complaints relating to intermediaries selling banking and/or mortgage products

FOS has however seen a growing number of complaints about mortgage offers being withdrawn, or not renewed, where property purchases were not completed on time.

It also saw a number of complaints during the year about the way in which flexible mortgage accounts operate, in circumstances where money paid in to reduce the mortgage was no longer available for withdrawal – or where “contingent” facilities had been withdrawn or reduced.

It has also seen more disputes involving mortgage transfers completed without a signed acceptance – usually following a phone conversation between the consumer and the lender.

In some of these cases, by not having clear documentation as evidence of their contact with the customer in relation to the disputed events, lenders seem to have left themselves open to claims that the consumer never consented to the transfer.

Other areas of complaint included mortgage arrears, and one complaint relating to sale-and-rent-back.

In total FOS resolved a record 166,321 disputes – a 46% annual increase –resulting in compensation for consumers in 50% of cases. It handled 925,095 consumer enquiries – over 3,500 each working day.


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  • steve1 21st May 2010 at 3:53 pm

    Thanks Kevin, but that is quite common knowledge, my point is that banks borrowing & lenders is based on LIBOR, BBR, SWATS and too, savers funds,as well as other factors but the fact that BBR & LIBOR has been so low for some time should have a bearing to some degree om SVR as clearly the SVR being implemented by some lenders i.e Chelsea who where offering one of the highest SVR yet they were giving one of the lowest saver rates,does not ring true.

  • Kevin Grannersby 21st May 2010 at 10:37 am

    @steve1 – since the money markets effectively closed in 2007, most lenders now get the majority of their funding from savers. So the rates that are paid to savers determine what has to be charged to borrowers.

    Now, you might say “But savers are getting low rates too,” which, if we’re comparing to 2007/8, would be right. But as everyone now needs to compete for savers’ funds, we’re seeing new savings rates that are several % more than Bank Base Rate – this would have been unheard of pre-2007.

    Lenders can’t lend all the cash they get from savers, though. They are required to put a significant chunk of it on one side, as liquidity, earning them almost nothing. (Low rates hurt lenders too.)

    With the remainder, they will have to lend at a rate that not only covers the savings rates, but also an element to cover mortgage losses (we’re in a recession, so these are generally higher) and the cost of running their businesses.

    So it’s not as easy as looking at BBR (or LIBOR for that matter), adding a fixed margin to it, and coming up with an SVR.

    Hope this helps.

  • steve1 20th May 2010 at 2:11 pm

    Can someone explain then, without a load of diatripe how they arrive at the SVR.And if the cost of money has Nothing to do with LIBOR or BBR what does drive it.

  • Sajj Mahmood 19th May 2010 at 5:04 pm

    thanks kevin, I was beginning to think i dont understand the bbr and svr differentials anymore great comment. It isnt related,

  • Kevin Grannersby 19th May 2010 at 4:23 pm

    I’m bemused by the first two comments. If even mortgage professionals believe that BBR has something to do with the cost of lending at SVR, what hope do their clients have?

    I’m amazed that people who apparently understand the mortgage market are still labouring under this misapprehension.

  • salil chaudhari 19th May 2010 at 4:06 pm

    We now have a coalition who promises fairness for all. They should act immediately to stop this inequitable hugh interest rate differential between the BBR at 0.5% and the SVR at around 6%.

  • Paul 19th May 2010 at 12:01 pm

    The cost of money is not linked to BBR or LiBOR. Not that straighforward. Lending institutions cannot buy money at those rates, so cannot be expected to lend at them.

  • Ancient Wisdom 19th May 2010 at 11:37 am

    No wonder compliants are rising, consumers are getting ripped off by lenders when rates go up and now, when rates go down and what they signed up to is not worth the paper its written on.

    And yet, the directors of the banks and lenders continue to earn millions from consumers misery.

    My own faith in financial services is at such a low ebb, we are even thinking of closing up shop – RDR will kill off most businesses, and once again, consumers will lose out to good, free impartial advice and continue to get ripped of by high street lenders selling them all manner of ill advised and poor protection and insurance products. No wonder PPI complaints are rocketing – you get made to feel like a a ‘Fois Gras’ Goose when you take direct advice, lenders dont care about anything except their bottom line – FACT.

  • steve1 19th May 2010 at 11:25 am

    Once again the borrower is getting ripped off by the lenders, there is not solid justification for the huge SVR which some lenders have applied. Whilst lenders have to make profits to survive, with BBR at .05% and LIBOR not much higher where is the justification to have such high SVRs other than to boost bonuses & cover their huge salaries. Or are we missing something here because when you ask a lender to explain their SVR they have not got a clue & that it is dealt with by another department.Some have gone on to say its to help their Savers but clearly the rates applied to Savers is not reflected. The FSA need to act now rather than attacking the smaller businesses which they find as an easy target.