Introducer Today

Blogs

Mutual ethos fades with each SVR rise

Friday 22nd January 2010

Skipton Building Society’s giant Standard Variable Rate (SVR) hike of 1.45 per cent this week felt like a major staging post.

Skipton has been in and out of the best-buy tables for years on savings and mortgage rates. Its carefully crafted solid image founded on the ethics of mutuality has been key to its success. So, to potentially sting 29,000 mortgage borrowers sitting on Standard Variable Rate by throwing out a rate guarantee capping SVRs at three per cent over base is a dramatic gear-change.

[To see the Introducer story, Skipton hikes SVR by 1.45 in single move, click here]

Letters went out to customers this week blaming the “exceptional market conditions” and borrowers will have 90-days before the rate hike hits their wallets to stay and pay the extra or remortgage away, which most will probably do.

Clearly, times really are this tough. Actively trying to slough off valuable, income producing mortgage customers is a serious departure from traditional strategy for a building society. Any losses sustained by its sprawling mortgage and finance-related business empire in the downturn will also have been cash drains for the society. But Skipton isn’t the only mutual lender raising SVR to straighten out its books.

According to broker London & Country, Skipton is the eighth mutual to hike rates out of step with base rate stabilisation since the last cut to 0.50 per cent in March 2009.

Lender Old SVR New SVR Increase in Monthly Payment

Repayment Interest Only
Skipton BS 3.50% 4.95% GBP 81.06 GBP 120.83
Accord 5.34% 5.99% GBP 39.12 GBP 54.17
Mansfield BS 5.24% 5.59% GBP 20.81 GBP 29.16
Marsden BS 5.49% 5.95% GBP 27.76 GBP 38.33
Kent Reliance BS 5.78% 6.08% GBP 18.28 GBP 25.00
Cambridge BS 4.00% 4.59% GBP 33.11 GBP 49.17
Scottish BS 5.04% 5.29% GBP 14.69 GBP 20.83
Ipswich BS 4.99% 5.49% GBP 29.48 GBP 41.67
*Based on £100k mortgage over 25 years

Source: London and Country
To follow the SVR hikes, go to http://www.lcplc.co.uk/svrwatch

The mutual sector biggest problem is that it’s struggling to compete in the savings market against effectively against government-backed banks. Northern Rock and NS&I ploughed back into the savings market in November last year with some of the most competitive savings rates seen in a while. RBS followed but Building Societies Association (BSA) said the biggest issue at stake is that building societies continue to compete for savings on a “distorted playing field.” The BSA refused to speculate on how many more mutuals or banks would do the same.

As more borrowers jump away from SVR into the remortgage market, brokers are likely to benefit. But watching the mutual sector struggling to compete on savings and mortgages, despite having the simplest funding model of all (saver money in: mortgages out) is disconcerting.

The extent of the building society sector’s problems will become more apparent this year. But lenders actively turning away mortgage business as a strategy can’t be good for market confidence or the sector itself.

Have your say on this story using the comment section below

Send to a Friend

View Comments 0 comments

Report Abuse

There have been no news comments

Post Comments

Please login to post comments:

Post Comments without login

Most Read News Stories:

Regulator to ban self-cert mortgages
Tuesday 13th October 2009

Tesco to launch mortgages before current accounts
Monday 23rd November 2009

Order to suspend HIPs is signed
Monday 17th May 2010

Mortgage advisor pleads guilty to charges
Wednesday 29th October 2008

Case result major blow for claims management firms
Monday 26th October 2009

Discuss in Forum

RSS Feed

Share this article:

Digg it

Del.icio.us

Newsvine

Nowpublic

Feedback:

If you have any questions or suggestions about this article or our news section, please don't hesitate to contact us.

Claims Financial are a market leader in the £30 billion financial compensation market and 99% of our work comes from partners just like you.

Read More