Fallout to hit Skipton Building Society
As we covered in one of our earlier articles, the Skipton Building Society has effectively ripped up and rewritten thousands of mortgage arrangements using a get out clause introduced in 2002. The company has used the prolonged period of low base rates in the UK as a means of rewriting the terms of its standard variable rate mortgage which prior to yesterday could not be more than three percentage points above base.
With up to 60,000 mortgage holders affected by the change in the standard variable rate, which will now increase to 4.95% and see the average homeowner paying back an additional £1500 a year, there is sure to be some significant fallout for the building society. There is no doubt that the building society sector has been hammered by the economic downturn and the credit crunch but it is more the inability to attract more and more savers to the UK operation which forced the society's hand.
The margins between savings interest rates and mortgage interest rates were unsustainable going forward and could eventually have brought down the Skipton Building Society. However, when many of the building society's customers signed their mortgage arrangements they did not expect to see a jump from 3.5% to 4.95% overnight. The fact that such a water tight clause was written into the mortgage agreements means there is unlikely to be any legal recourse for customers.
Share this..
Related stories
Is the UK recession really coming to an end?
While there have been a number of comments and signals today which would indicate that the UK recession is coming to an end, why only last week did we see the Bank of England pour cold water on hopes for a short-term recovery?
Today we saw an upbeat statement from Bovis Homes and new figures regarding business confidence which appears to be as high as it has been since the beginning...
More doom and gloom in the mortgage market
It has been revealed that yet more tracker mortgages have been withdrawn from the market ahead of today's expected interest-rate reduction by the Bank of England leading to cries that the financial sector is not fulfilling its obligations as agreed with the government. Since the rescue package for the sector was announced we have seen a slow backpedalling by authorities and the banking sector wher...
Read MoreWhat do you know about James Gordon Brown?
James Gordon Brown, otherwise known as Gordon Brown, is the current leader of the Labour Party and has been the prime minister in the UK since 27 June 2007. But what you know about Gordon Brown and his career in politics? Gordon Brown was born on 20 February 1951 in Giffnock, Renfrewshire, Scotland, his father, John Ebenezer Brown, was a minister of the Church of Scotland and has had a strong i...
Read More'Robin Hood' banker goes to jail
A "Robin Hood" bank worker diverted £7 million of his corporate clients' money to help out other businesses who were struggling financially, it has emerged.Benedict Hancock, 39, was sentenced to 18 months in jail at Blackfriars Crown Court for his false accounting.The court also heard that the majority of clients who had money transferred away from their accounts did not notice that it was missin...
Read MoreThe price of gold falls on US rescue package
As we mentioned on a previous post, gold has been a counter cyclical play for many investors in troubled times. The price has proved to be very resilient and moved higher and higher over the last few months as the worldwide recession got worse and worse. However, interestingly we saw a 2.4% pullback today when the US Senate announced a $780 billion rescue plan for the US economy. So have we seen t...
Read More