As the UK avoided a triple dip recession, commentators believe 2013 marked the end of “The Great Recession” which refers to the economic down turn that resulted after the 2007 global credit crunch.
This period ultimately collapsed the local property market as the housing bubble well and truly popped. Market sentiment has been uncertain since and there can be no true economic recovery until the debt hangover has been fully addressed.
What about 2013, and why am I writing about it today? 2013 was a particularly problematic year for banks and for borrowers. The reality of the recession had been embedded and both parties were really starting to struggle financially. The effect is still being felt today.
The banks were finding it so tight as a result of the decline in Bank of England base rate, that lenders like Bank of Ireland and West Bromwich began hiking their rates on existing customers, who were trapped in their Negative Equity Properties.
The Bank of Ireland's decision in particular to triple interest rates for some borrowers led to a series of legal action, unlucky for those customers, but likewise unlucky for the other mortgage lenders who were at this point trapped with the contracts made with their customers in the lucrative boom years.
So how do you solve a problem like your margin? Well a number of lenders only go and approach the regulator over changes to interest rates and to discuss changes to deals they already have with existing customers. Their focus was with respect to their Standard Variable Rates (“SVR”). Technical point – Banks adhere to the Bank of England base rate but are generally free to change their SVRs whenever they want.
What is the problem?
Some lenders had written clauses into mortgage contracts promising to retain a set margin with the base rate meaning they could not freely change their SVR. Mortgage deals which offer to track the base rate also have this margin written into the agreement with borrowers so some of these loans have proved costly for the bank and not the borrower.
At the time, a letter to banks and buildings societies from the Financial Conduct Authority’s Supervision Director, Clive Adamson, said: "A number of mortgage lenders have engaged with us recently about changing their mortgage contracts, including SVRs." He added: "We recognise that mortgage lenders may want to vary their SVRs or other terms in their contracts, but we are concerned that the factors driving changes to SVRs may not always be transparent to consumers." Hold that thought…
The letter said that while lenders did not have to notify the FCA of changes to their SVRs, they needed to beware that contract changes could be unfair under the Unfair Terms in Consumer Contracts Regulation 1999 and with some of the regulator's rules.
So the banks find themselves in costly contracts throughout the UK, and it appears from recent statements during the period that I have reviewed, one lender in particular appears to have taken matters into their own hands…our old friends at Lloyds Banking Group.
In 2013 we have identified subsidiaries of Lloyds Banking Group decided to change the way in which they charged their customers, sent them a helpful guide on the changes and all, but forgot to mention that they would double charge on some bank interest in the process.
Surely this cannot be true? Let us not forget that in August 2014 it was unearthed in the High Court in Belfast that subsidiaries of the Lloyds Banking Group, namely Bank of Scotland on that occasion, were unfairly double billing customers who fell behind on their mortgages. For more on that, read my Blog here.
Without reviewing your documentation we cannot guarantee you have been affected but we encourage everyone in the UK who had a mortgage with Lloyds Banking Group during 2013 to get in touch with us. This includes Bank of Scotland plc, Birmingham Midshires, Cheltenham & Gloucester, Halifax plc, Intelligent Finance, and The Mortgage Business (TMB).
So if in 2013 you were one of the unlucky ones…let us see if GDP can find a solution to reverse your fortunes. We would love to hear from you.