Skipton Building Society activates mortgage release clause

The Skipton Building Society has sent shockwaves through the mortgage industry with the revelation that the group will trigger an "exceptional circumstances" get out clause written into the customer mortgage deals sealed since 2002. Despite the fact that the Skipton Building Society never actually defined "exceptional circumstances" it has cited the exceptionally low Bank of England base rate as a reason for rewriting these mortgage arrangements.

Under the company's standard variable rate agreement, the mortgage rates on these arrangements can never be more than three percentage points higher than UK base rates equating to a maximum rate of 3.5% at the moment. However, the company has confirmed it is having to pay savers a similar rate to attract their attention and their business and is therefore struggling to make a profit on a significant number of mortgage deals.

The change in strategy by the building society will affect more than 60,000 customers who were either on the lower rate or about to move onto the lower rate. The standard variable rate will now be 4.95% in order to give the Skipton Building Society the opportunity to make a profit when taking into account the cost of attracting savers against the cost of providing mortgage funding.