Can my mortgage lender legally refuse to drop my interest rates in line with what's happened/happening nationally?
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My mortgage sign-up papers show the rate as "variable" and yet I am still paying a hideously high rate (I think it's around 9.25%) whereas the national rate is now only .05%, isn't it? When I ask my lender they merely say "we are not a high street lender and not bound by the same rules".
As usual, if one is enduring financial struggles through no fault of one's own, and therefore seen as a higher risk, that person is penalised for being poor and ends up paying more than someone wealthy. Totally illogical and unfair!
Damsel_in_Distress
1 year ago
Expert Financial Adviser Answer
Darren Smith
answered 1 year ago
you are mixing several problems into one.
a variable rate whereby there is no link to any other, which is often the case with a lender's "standard variable rate" is completely at the control of the lender.
they choose when to vary the amount and it will have no bearing to any other financial measure.
you are comparing against tracker rates whereby the rate paid is specifically linked to the bank of england base rate and as the base rate changes up or down the rate you pay changes by the same amount.
it sounds like you might be with a non-mainstream lender, perhaps the likes of kensington or GMAC who charge higher rates linked to the risk of the borrower, perhaps you had little evidence of income when you took out the mortgage/short work history/ adverse credit?
if none of these issues are the case and you have at least 10% equity in your home, then you could easily reduce your rates by almost half (with more equity an even bigger reduction).
although the bank base rate is 0.5%, there are very few people paying close to that on their mortgage - some "lucky" ones might be paying base rate plus 0.5% giving a rate of 1% but these deals would have been signed up when the base rate was 5% giving an initial starting deal of 5.5%.
this is not a case of one rate for the wealthy and another for the not so wealthy.
mortgages have always been priced for risk and standard lender rates are set at their discretion.
nationwide came under attack last year for changing their standard rate which was capped at 2% above base rate to something nearer 4.5%. They enticed borrowers to switch by giving them new short term deals which would revert to the higher standard rate.
the word standard is a misnomer, as it is not the standard for all mortgages but the standard for a particular lender.
it might be possible to resolve some of your issues but i would suggest you have a chat with a local IFA to see if they can assist you with changing lender.
unfortunately, there will be little you can do to force your lender to change their stance as they will no doubt be acting exactly as the mortgage offer they made you.
its not nice to hear but this is a good example of why you should always read the full details of any legal contract before you sign it. you are not alone in what you describe but many people that have found themselves in the same place got there from picking a mortgage from a comparison site which only compared headline initial details and not the "what happens next" scenario.
if none of the above options are able to help you out, i would suggest that you make contact with the citizens advice bureaux or consumer credit counselling service as they might be able to assist you with reorganising your financial commitments.
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a variable rate whereby there is no link to any other, which is often the case with a lender's "standard variable rate" is completely at the control of the lender.
they choose when to vary the amount and it will have no bearing to any other financial measure.
you are comparing against tracker rates whereby the rate paid is specifically linked to the bank of england base rate and as the base rate changes up or down the rate you pay changes by the same amount.
it sounds like you might be with a non-mainstream lender, perhaps the likes of kensington or GMAC who charge higher rates linked to the risk of the borrower, perhaps you had little evidence of income when you took out the mortgage/short work history/ adverse credit?
if none of these issues are the case and you have at least 10% equity in your home, then you could easily reduce your rates by almost half (with more equity an even bigger reduction).
although the bank base rate is 0.5%, there are very few people paying close to that on their mortgage - some "lucky" ones might be paying base rate plus 0.5% giving a rate of 1% but these deals would have been signed up when the base rate was 5% giving an initial starting deal of 5.5%.
this is not a case of one rate for the wealthy and another for the not so wealthy.
mortgages have always been priced for risk and standard lender rates are set at their discretion.
nationwide came under attack last year for changing their standard rate which was capped at 2% above base rate to something nearer 4.5%. They enticed borrowers to switch by giving them new short term deals which would revert to the higher standard rate.
the word standard is a misnomer, as it is not the standard for all mortgages but the standard for a particular lender.
it might be possible to resolve some of your issues but i would suggest you have a chat with a local IFA to see if they can assist you with changing lender.
unfortunately, there will be little you can do to force your lender to change their stance as they will no doubt be acting exactly as the mortgage offer they made you.
its not nice to hear but this is a good example of why you should always read the full details of any legal contract before you sign it. you are not alone in what you describe but many people that have found themselves in the same place got there from picking a mortgage from a comparison site which only compared headline initial details and not the "what happens next" scenario.
if none of the above options are able to help you out, i would suggest that you make contact with the citizens advice bureaux or consumer credit counselling service as they might be able to assist you with reorganising your financial commitments.
Expert Financial Adviser Answer
Dr David Carter FPFS
answered 1 year ago
I am sorry to hear that you have some financial problems.
Darren is of course right, both in his assessment of the situation, and his advice to talk to an independent adviser. Very high rate loans, such as yours, were common a few years ago when those with adverse credit were more welcomed by lenders than they are nowadays. In principle, the idea would have been to take such a loan with perhaps a 2 or 3-year tie-in, and to do your utmost in that time to tidy things up: keep on top of your mortgage payments, make sure you are on time with all bills, and maybe repay any outstanding county court judgements. When ready, therefore, you would remortgage elsewhere, at a 'mainstream' rate.
So whether you can remortgage elsewhere will depend upon whether you can fit into current criteria, notably that of your creditworthiness. If things haven't improved for you then I suspect you can go nowhere else, and if so your task will be to start that credit-building process as soon as possible - and, yes, seek help from others such as citizens advice bureaux.
You might still be tied in because, for example, you took a 3-year or a 5-year 'deal.' and it is likely that the cost of coming out early would be prohibitive. But if you are not tied in (or won't be tied in for much longer) and you feel that your creditworthiness has improved, do two things. First, contact your existing lender to see whether they have any better products that you could move on to, and second, talk to a broker or independent adviser to obtain their judgement and advice. Good luck with this.
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Darren is of course right, both in his assessment of the situation, and his advice to talk to an independent adviser. Very high rate loans, such as yours, were common a few years ago when those with adverse credit were more welcomed by lenders than they are nowadays. In principle, the idea would have been to take such a loan with perhaps a 2 or 3-year tie-in, and to do your utmost in that time to tidy things up: keep on top of your mortgage payments, make sure you are on time with all bills, and maybe repay any outstanding county court judgements. When ready, therefore, you would remortgage elsewhere, at a 'mainstream' rate.
So whether you can remortgage elsewhere will depend upon whether you can fit into current criteria, notably that of your creditworthiness. If things haven't improved for you then I suspect you can go nowhere else, and if so your task will be to start that credit-building process as soon as possible - and, yes, seek help from others such as citizens advice bureaux.
You might still be tied in because, for example, you took a 3-year or a 5-year 'deal.' and it is likely that the cost of coming out early would be prohibitive. But if you are not tied in (or won't be tied in for much longer) and you feel that your creditworthiness has improved, do two things. First, contact your existing lender to see whether they have any better products that you could move on to, and second, talk to a broker or independent adviser to obtain their judgement and advice. Good luck with this.