Skipton Scrap Mortgage Promise

The Skipton Building Society has decided to break their Mortgage Promise, that their standard variable rate (SVR) will never be more than 3% above the Bank of England Base Rate.

They have informed their existing mortgage customers that as of the 1st March 2010 their new SVR will be set at 4.95% a leap of 1.45%. They have been able to do this as the Mortgage Promise they made had a clause in the contract to allow them to break the deal off under “exceptional circumstances”. Each of the customers this affects now has the option to change their mortgage without incurring any penalty or fee.

Unfortunately at present Building Societies have to make some tough decisions and we are seeing most of them raising their SVR. Skipton are only doing what others in the sector are doing, the only difference being they have had to scrap the promise they made to do it. On a business level you can understand the need for some action but it is the circumstances and the scale of the rise that are eyebrow raising.

The bit that worries me is that Skipton Building Society have recently taken over The Scarborough Building Society, should this have been allowed to happen if Skipton’s finances are in such a state that they have to raise their SVR by 40%?

In addition to this Skipton have already sold part of their group, Callcredit and in doing so allegedly raised £100million. The press release I read said that it had sold the company to support its balance sheet in order to takeover smaller societies that may be in trouble.

One last thing, the thing that bothers me most of all and I think it should bother others too. Skipton Building Society is supposedly a mutual society and operates under the premise that they are run for their members, both borrowers and savers by the appointed board. Yet they feel it is ok to break their promises and hike the borrowing rate up by 40%. In addition to this the members of this allegedly mutual society did not get a sniff of the money made on the sale of Callcredit.

How mutual does all that sound to you? Here at www.thebestbestbuys.com we don't think it is very mutual at all.