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| Version 1 | Version 2 |
|---|---|
| Home loans 'surprisingly strong' | Home loans 'surprisingly strong' |
| (about 2 hours later) | |
| Mortgage lending was "surprisingly strong" in December, but the figures came as one building society announced a sharp rise in rates. | Mortgage lending was "surprisingly strong" in December, but the figures came as one building society announced a sharp rise in rates. |
| The Council of Mortgage Lenders (CML) said UK mortgage lending increased by 14% in December compared with November, to £13.7bn. | The Council of Mortgage Lenders (CML) said UK mortgage lending increased by 14% in December compared with November, to £13.7bn. |
| But Skipton Building Society announced that thousands of its customers would see a hike in their mortgage bill. | But Skipton Building Society announced that thousands of its customers would see a hike in their mortgage bill. |
| It will raise its standard variable rate from 3.5% to 4.95% on 1 March. | It will raise its standard variable rate from 3.5% to 4.95% on 1 March. |
| It is removing the ceiling on the standard variable rate (SVR) that guaranteed the rate would be no more than 3% above the Bank rate - which is currently at a record low of 0.5%. | It is removing the ceiling on the standard variable rate (SVR) that guaranteed the rate would be no more than 3% above the Bank rate - which is currently at a record low of 0.5%. |
| The building society - the fourth largest in the UK - said that it was enacting the clause in contracts which allowed it to remove the ceiling "in exceptional circumstances". | The building society - the fourth largest in the UK - said that it was enacting the clause in contracts which allowed it to remove the ceiling "in exceptional circumstances". |
| Relatively few lenders have similar ceiling promises in place for existing borrowers. | |
| Savers' demands | Savers' demands |
| The chief executive of the Skipton Group David Cutter said that throughout 2009 the society had operated on an extremely low SVR, while trying to maintain returns for savers. | The chief executive of the Skipton Group David Cutter said that throughout 2009 the society had operated on an extremely low SVR, while trying to maintain returns for savers. |
| UK savers have been the forgotten victims of the credit crunch David Cutter, Skipton chief executive | UK savers have been the forgotten victims of the credit crunch David Cutter, Skipton chief executive |
| However, he said that this could not continue as the Bank rate continues to stick at 0.5%. | However, he said that this could not continue as the Bank rate continues to stick at 0.5%. |
| "Our duty for 157 years has been to act in the long-term best interests of all our members - savers and borrowers - and, with base rate expected to remain low for some considerable period, we have reviewed our low SVR," he said. | "Our duty for 157 years has been to act in the long-term best interests of all our members - savers and borrowers - and, with base rate expected to remain low for some considerable period, we have reviewed our low SVR," he said. |
| Traditional building society models see a direct link between the interest given to savers and the income from mortgage borrowers. The Skipton has 750,000 savers and 100,000 borrowers. | Traditional building society models see a direct link between the interest given to savers and the income from mortgage borrowers. The Skipton has 750,000 savers and 100,000 borrowers. |
| But Mr Cutter described savers as the "forgotten victims of the credit crunch". | But Mr Cutter described savers as the "forgotten victims of the credit crunch". |
| "Their money is now in hot demand as banks - in particular those that have been nationalised or part nationalised - continue to reduce their reliance on the wholesale markets," he said. | "Their money is now in hot demand as banks - in particular those that have been nationalised or part nationalised - continue to reduce their reliance on the wholesale markets," he said. |
| "This, coupled with the rates payable by the government's National Savings and Investments, has driven up the cost of retail funding to an unprecedented level relative to mortgage rates." | "This, coupled with the rates payable by the government's National Savings and Investments, has driven up the cost of retail funding to an unprecedented level relative to mortgage rates." |
| Letters | Letters |
| The customers affected will receive a letter from the lender, explaining the decision. | The customers affected will receive a letter from the lender, explaining the decision. |
| SKIPTON SHOCK Skipton SVR customers were promised they would pay no more than 3% above the Bank rate of 0.5%But their contact says this ceiling can be removed in "exceptional circumstances"Skipton says the continued record low Bank rate and high funding costs are "exceptional"The SVR will increase from 3.5% to 4.95% on 1 March | SKIPTON SHOCK Skipton SVR customers were promised they would pay no more than 3% above the Bank rate of 0.5%But their contact says this ceiling can be removed in "exceptional circumstances"Skipton says the continued record low Bank rate and high funding costs are "exceptional"The SVR will increase from 3.5% to 4.95% on 1 March |
| The exceptional circumstances being cited include the Bank rate being less or equal to 2.7%. | The exceptional circumstances being cited include the Bank rate being less or equal to 2.7%. |
| Another reason cited by the Skipton is if the margin between the Bank rate and the UK average branch instant access savings rate being less than or equal to 2.5% for each of the three preceding months. | Another reason cited by the Skipton is if the margin between the Bank rate and the UK average branch instant access savings rate being less than or equal to 2.5% for each of the three preceding months. |
| "While we understand this change will be unwelcome for those borrowers who will end up paying more as a result, we hope that they will understand it is a necessary step that is in the best interests of our membership as a whole, and indeed the society itself, in the long run," Mr Cutter said. | "While we understand this change will be unwelcome for those borrowers who will end up paying more as a result, we hope that they will understand it is a necessary step that is in the best interests of our membership as a whole, and indeed the society itself, in the long run," Mr Cutter said. |
| He said that market conditions were exceptional with high costs for funding mortgages, driven by "unprecedented competition" and "distorted markets". | He said that market conditions were exceptional with high costs for funding mortgages, driven by "unprecedented competition" and "distorted markets". |
| Sue Anderson, of the Council of Mortgage Lenders, agreed that the climate was "very unusual". | Sue Anderson, of the Council of Mortgage Lenders, agreed that the climate was "very unusual". |
| "We have had a very low set of interest rates sustained for a long period of time. The wholesale markets are not really reopening," she said. | "We have had a very low set of interest rates sustained for a long period of time. The wholesale markets are not really reopening," she said. |
| "This is creating a continuing pressure for lenders in terms of what is available for them to lend out. But even under the new regime, borrowers are still experiencing very low rates." | "This is creating a continuing pressure for lenders in terms of what is available for them to lend out. But even under the new regime, borrowers are still experiencing very low rates." |
| In general, many borrowers have chosen to revert to a SVR when their fixed rate deal comes to an end, rather than remortgaging, owing to the low levels of interest rates. | In general, many borrowers have chosen to revert to a SVR when their fixed rate deal comes to an end, rather than remortgaging, owing to the low levels of interest rates. |
| Lending figures | Lending figures |
| The latest figures from the CML show that UK mortgage lending was up 3% in December compared with the same month a year earlier. | The latest figures from the CML show that UK mortgage lending was up 3% in December compared with the same month a year earlier. |
| CML economist Paul Samter said that the December lending figure was "surprisingly strong" as seasonal factors usually meant a slowdown compared with November. | CML economist Paul Samter said that the December lending figure was "surprisingly strong" as seasonal factors usually meant a slowdown compared with November. |
| "Evidence suggests that the rise was driven by a surge in house purchase completions," he said. | "Evidence suggests that the rise was driven by a surge in house purchase completions," he said. |
| "The most likely explanation is that buyers of cheaper property wanted to complete their transactions before the end of the year to beat the end of the stamp duty holiday." | "The most likely explanation is that buyers of cheaper property wanted to complete their transactions before the end of the year to beat the end of the stamp duty holiday." |
| He predicted that the mortgage market would be stronger in 2010 than in 2009. | He predicted that the mortgage market would be stronger in 2010 than in 2009. |