Will Mortgage Express copy BoI and West Brom and raise their rates?

by Ed Atkinson

21:33 PM, 25th September 2013
About 5 years ago

Will Mortgage Express copy BoI and West Brom and raise their rates?

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Will Mortgage Express copy BoI and West Brom and raise their rates?

Is there a trend? First the Bank of Ireland raised their Tracker rates and now West Bromwich Building Society have followed suit, will Mortgage Express copy and raise their rates?

We borrowed a tidy sum from Mortgage Express and have been enjoying the “Product Variable Rate” of 1.75% above the Bank of England Base Rate. The rate seemed secure but West Bromwich Building Society’s recent move to increase their tracker rates worries me.

If West Bromwich BS get away with this, then will Mortgage Express have a punt as well? Their reputation these days is of doing all they possibly can, fair or foul, to get borrowers to re-mortgage to other banks.

I’ve looked back at my mortgage offers from Mortgage Express and it looks hopeful for us. The mortgages started as either discount or fixed rates and then reverted to the “Product Variable Rate”. The first one we took out in 2001 and then we renewed the deal with various extra drawdown loans and new discount rates etc. On first impression, the renewals all seem to refer back the original contract rather than start new ones. The key phrase in the original 2001 agreement was straight: “the interest rate will be 1.75% above base rate”. I trust it still stands.

Another Mortgage Express mortgage offer (2004) states “a variable rate of 6.5% (which is 1.75% above the Bank of England Base rate – currently 4.75%)” and later it states that the rate “will revert to the variable rate …. for the remainder of the term”. The separate “Conditions 2004” booklet did contain a section on Mortgage Express’s rights to change the interest rate but it started “If the interest rate is one which we can vary at our discretion …”. So again this looks good.

However, I hear from Property118 that West Bromwich have no clauses in their offer letters referring to their rights to increase their tracker margin. Also they didn’t refer to their special conditions booklet (which presumably did have some text providing for when and how the tracker margin might be changed). Finally, they ignored the October 2004 mortgage regulations cut off date.

Property118 also reports that Bank of Ireland did keep to those 3 rules and they seem to be getting away with it. So, now West Bromwich have gone further than Bank of Ireland and we all wait to see if they’ll get away with it.

Mortgage Express would need to push the boundaries further still, I guess. I suppose they are first waiting on the outcome of the West Bromwich’s move. Will Mortgage Express copy BoI and West Brom and raise their rates

Are you worried as well?

EDITORS NOTE

Property118 is leading a Class Action group to fight back by taking a test case to Court if necessary to prove once and for all that amending the margin on a tracker rate mortgage is breach of contract. If you are worrying whether your mortgage lender will follow the lead of Bank of Ireland or West Brom please READ THIS and complete the form below to support this campaign.

The deadline for submission of instructions has now expired. However, it may still be possible to join the representative action subject to paying Court fees and an additional cost to cover associated administration. For details please email : carla@cotswoldbarristers.co.uk



Comments

Mark Alexander

7:36 AM, 26th September 2013
About 5 years ago

Hi Ed

I too am worried about the precedents being set by Bank of Ireland and West Brom. I'm not directly affected by the questionable actions of these lenders but I do have substantial mortgages with The Mortgage Works, Paragon and Mortgage Express and I do worry about what they might do. It is for this reason I am putting so much effort into this campaign, we need a test case we can all refer back to and the ability to be able to instruct a "no win no fee" solicitor to fight a case if/when other lenders "try it on".

David Lawrenson believes that Barclays/Woolwich could be next, they certainly have a track record of doing things which suit them, regardless of the consequences to their clients. The LIBOR scandal is one such example but perhaps closer to home has been their withdrawal of offset facilities - see http://www.property118.com/barclays-offset-mortgage-customers-take-heed/38254/

Then there are the Irish who also need to re-build their balance sheets so I'd also be very worried if I had mortgages with Capital Homeloans or their parent company, Irish Permanent.

What about Platform Homeloans too?

I have also been reading that Skipton and Manchester Building Society hiked their tracker mortgage margins before the Bank of Ireland.

Where will this stop?

With the right level of support, we can stop this now, but it will require a lot more passion from a lot more people to spread the message, recruit support and raise the required funds to fund a test case in the Courts.
.

Vanessa Warwick

8:18 AM, 26th September 2013
About 5 years ago

I think we need to be careful not to start building hysteria over this issue.

West Bromwich have raised their interest rates, but I believe it only affects around 7,000 people?

There are 1.5 million landlords in the U.K.!

Landlords are vital to the private rented sector and the government knows this.

I am focusing on real, actual problems that are happening, not imagined ones that don't yet exist.

I have written a strong letter to the CEO of Mortgage Express, asking for an understanding of their exact policies to reduce their loan book, as that to me is a real and present danger, with their Field Officers going out and reviewing people's portfolios.

http://www.propertytribes.com/mortgage-express-getting-tough-t-8904.html

Remember that landlords have a weapon that they did not have 10 years ago ... we have the social web where we can connect and unite.

Sites like Property Tribes and P118 give landlords a voice and the ability to become a force to be reckoned with.

There is strength in numbers, so let's stick together and tackle real problems as they arise.

Mark Alexander

8:20 AM, 26th September 2013
About 5 years ago

A readers letter, from a very arrogant person, back in 2012 has just popped into my mind. He said .....

"........You watch the FSA allow the banks to change all your mortgage terms, mark my words. You all think you are safe on your Mortgage Express base plus 1.75% deals don’t you? How safe will you feel when they are allowed to increase your margins to base + 4%.......?"

And here is the thread http://www.property118.com/the-property-boom-of-2012/21545/

Who was he talking to back then? Could his wine bar be in Canary Wharf I'm beginning to wonder? Are some of his drinking buddies at his local wine bar employees of the FSA?

You have to wonder don't you???
.

Mark Alexander

8:30 AM, 26th September 2013
About 5 years ago

Reply to the comment left by "Vanessa Warwick" at "26/09/2013 - 08:18":

Hi Vanessa

Mass hysteria is exactly what we need. What percentage of the 1.5 million landlords actually read our forums on a regular basis, belong to a landlords association and know what's going on? I reckon the figure is less than 10%

Many of them are oblivious to the risks to their busineses.

Some people will bury their heads in the sand because they are not affected today. I'd like to bet there were very few of the West Brom borrowers who were too worried about the BoI borrowers and that very few of them were ever actually aware of the existence of the problem.

Must we really wait to a lender like MX, TMW or Paragon to do this before the industry sits up, takes notice and fights back?

If we do, it may be too late for a lot of people!
.

Vanessa Warwick

8:37 AM, 26th September 2013
About 5 years ago

Sorry ... I disagree. No, mass hysteria is not what we need at all Mark!

We need accurate information and advice dispensed to the landlord community.

If what you say comes to pass, there will be mass bankruptcies of landlords, and even more pressure will be put on social housing.

As it is there are nearly 2 million people on waiting lists for social housing.

Private landlords play an increasingly important role in the private rented sector and they will be protected because of this imho.

Mark Alexander

8:57 AM, 26th September 2013
About 5 years ago

Reply to the comment left by "Vanessa Warwick" at "26/09/2013 - 08:37":

Sorry Vanessa, I disagree.

Who is protected the landlords who have borrowed from BoI, WBBS, Skipton and Manchester BS and had the margin on their tracker rates increased? Answer - nobody!

Just because there are only 6,700 landlords affected by the WBBS announcement and a further 12,200 affected by BoI doesn't make it right does it?

I agree that quality information needs to be made available and that's what we are doing. See the complaint letter template below for example.

Human reaction to any shock is Surprise, Panic, Blame - it always has be and always will be.

We need to spread the message and educate people what's going on. That responsibility doesn't just fall to forum owners like you and I, it is also the responsibility of everybody reading our forums to tell their friends to tell their friends and so on until all 1.5 million landlords realise how serious this is and how it COULD affect their personal finances.
.
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Neil Patterson

9:48 AM, 26th September 2013
About 5 years ago

Reply to the comment left by "Vanessa Warwick" at "26/09/2013 - 08:18":

Hi Vanessa,

I agree that mass hysteria will not accomplish anything as the word implies unreasoned, illogical, and irrational fear.

I have read as much as is available to me concerning the BofI and I cannot believe the FCA have not yet done anything to protect consumers from what is so obviously an unfair change in contract. When you have conducted regulated mortgage work and been head of compliance as myself you know exactly the lengths you are required to go to prove that customers have been treated fairly over and beyond what most people even the customers themselves perceive as rational. For the FCA to not have stepped in yet is unbelievable, but from the weight of Justin's argument and evidence I still think it is a matter of time.

You have hit the nail on the head with Mortgage Express concerning their sole business aim being to reduce their lending book. If this was my job I would be looking at what BofI and West Brom have done, see if they get away with it and then look to increase the tracker rate to the point where you start getting arrears and force repayment of loans that way. Yes you will lose on some missed mortgage payments but you will gain on extra income and more mortgage redemptions. These people are only doing the job they have been asked to do in the same way traffic wardens do. (No disrespect intended as we need to keep traffic flowing so this is a vital job. I was just making the point we don't like the tickets)

In the absence of regulated protection for consumers it is up to companies such as ourselves and Tribes to band together and organise our sector to fight back before it is too late.

Just imagine if we had a property guru who ripped off 20,000 investors! We would be down on them like a tonne of bricks.

I also see Little evidence from government that they recognise the need to assist the PRS even though there is such a housing shortage. It is just politics getting in the way of Logic.

The tip of an Ice-burg is only 10% of its mass, but it is the bit under water that sinks ships.

Rob

11:25 AM, 26th September 2013
About 5 years ago

I have a few with MX plus BM, bank of Scotland and mortgage trust and 1 with BOI (not effected) i like to think of myself as a Realist and i think the banks the government the FCA and anybody else couldn't give a monkeys if all 1.5 million landlords went bankrupt and all the buy to let housing stock was repoed by the banks. There are things that happen behind the scenes that we the public will never know about and things happen for various reasons that are planned or un planned who knows, but one thing is for sure if all the banks want to increase there rates or change there terms then that's exactly what they will do to make a profit with out a single thought about any of the 1.5m landlords or the consequences. Being a Realist really dose worry the hell out of me!

Ed Atkinson

11:27 AM, 26th September 2013
About 5 years ago

Reply to the comment left by "Vanessa Warwick" at "26/09/2013 - 08:37":

Vanessa, I can't see government actively protecting landlords even if it would result in benefits within the social housing sector. Even the Tories would hate being portrayed as “the landlords’ party”. Anyway, government don't control the banks as we have seen.

The only means of protection is a class legal action which we'll need to organise ourselves. The potential savings in avoiding a rate hike are vast compared against a contribution to a class action fund. Here's some guessed numbers:

Say 2000 landlords contribute £200 each to raise £400,000. On average each landlord has properties worth in total £1,000,000 of which £300,000 is funded by long term trackers or Mortgage Express type Product Variable Rates. The class action prevents a potential 2% increase in these rates. The annual saving is thus £6,000 and let's guess it would last ten years: £60,000. That's what I'd call a return on investment.

If we assume these landlords were not BoI or West Brom customers, it would be a poor deal if there were no danger of their banks raising rates. But let's assume the probability is finite. The risk is the probability multiplied by the consequence in £. My guestimate numbers indicate that, in order for your investment into a class action to be a poor deal, the probability of your bank raising rates would need to be at or below 0.33% which is 1 in 300.

Put another way, it is similar to buildings insurance with vaguely similar numbers: a £200 premium to protect a £60,000 asset. If you think that the chance of fire etc in the building (in just one year) less likely than your bank raising rates (in any year)…. then join the class action.

So it is rational for us to get somewhat worked up, if not fully hysterical.

Neil Patterson

11:35 AM, 26th September 2013
About 5 years ago

Reply to the comment left by "Ed Atkinson" at "26/09/2013 - 11:27":

Fantastic statistical argument Ed.

Love your work 🙂

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