Skipton faces legal challenge to SVR hike

| February 23, 2010 | 1 Comment

Skipton Building Society’s decision to raise its standard variable rate (SVR) has resulted in an unexpected challenge from law firm, Leon Kaye.

In January, Skipton announced its intention to increase its SVR from 3.5% to 4.95% from 1st March 2010, despite the base rate remaining to an all-time low of 0.5%.

The lender evoked “exceptional circumstances” clauses that allowed it to remove a cap of 3% above base rate as follows: “Base rate is less than or equal to 2.7%; base rate minus the UK average branch instant access savings rate (as published monthly by the Bank of England) is less than or equal to 2.5% for each of the three preceding months.”

However, lawyers at Leon Kay are pointing out that “exceptional circumstances” clauses, which are normally included in contracts to ensure that the lender has an element of control if things turn bad, can fall foul of the Unfair Contract Terms Act 1977.

The firm says it is investigating the legality of Skipton’s decision to not honour its 3% cap and whether the downturn in the economy would warrant a trigger of the “exceptional circumstances” clauses.

Furthermore investigations are taking place into borrowers’ rights regarding the clauses under the Unfair Contract Terms Act 1977, with a view to establishing whether borrowers have a claim against the building society.

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  1. Anonymous says:

    I have a tracker rate mortgage with Norwich & Peterborough Building Society and they have written to many borrowers saying they are increasing our rates. I am not sure if what they are doing is legals. If they sell a tracker mortgage, how can they come along and change the product?.

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