KBC Variable Rate. BEWARE

[Silvio Dante]

I have for a number of months being communicating with KBC on why the decrease they announced last October was not passed on to us despite us being on a standard variable rate mortgage with them.
I have suspected their answer but had it confirmed in writing in recent days.

Quote:
"The announcement in the media of the rate change effective 1st December 2015 was a reduction in the Banks standard variable rate from 4.5% to 4.25%."

Because my mortgage was originally taken out at a slightly more favourable SVR at the time (I assume because of a low LTV) I was not on 4.5% last October.
Therefore KBC exclude me.

This in my opinion has monstrous implications for all new customers of KBC currently signing up to SVR mortgages substantially lower than the 4.25% KBC apparently use as their de facto benchmark.
If for instance KBC tomorrow announce they are reducing their SVR from 4.25 to 4.0% anyone who took out a new mortgage recently at a lower SVR 4% (ie everyone!) are likely to be excluded.
In essence new customers are signing up to something that isn't in fact KBC's SVR.
This to me is a practise that needs to be stopped, it is at best sneaky, at worst......

Based on my experience (all five increases in KBC's SVR were passed on to me since 2010) new customers are going to get fleeced as KBC will at will announce decreases to the top rate SVR only but will invariably pass on all increases.

What are people's views on this?
Is this fleecing on a grand scale or just yet another example of banks being incredibly devious in their announcements. I would imagine anyone who read their announcement last October who had a SVR mortgage would have fully expected the rate reduction to be applied.

Is it a matter that I should raise with the Financial Ombudsman?

btw
apologies if this matter has been previously discussed, I doubt I am the only one.

 

[mickoneill30]

KBC have a two tier system. There's the rates for new customers (these are what you'll hear all over the radio ads where they tell you they have no gimmicks and only offer you the best rates) and there are the rates for existing customers (otherwise known as we have you now so screw you).

When you join you should make sure you get the best rate possible because when the rates go down for new customers yours won't be touched. Welcome to KBC. "The bank of you".

The rate reduction of their SVR in Oct was their first reduction of their high rate in several years. I know as I was on that rate until I switched this year.


You're not the first one, these forums are full of posters that have figured this out over the last couple of years.
They won't negotiate either. Your only option is to switch.
I've no idea what the financial regulator would do. You might have your mortgage paid off before they give a damn.

 

[Silvio Dante]

Hi Mick,

I hear you but I think you have misunderstood slightly.
I am well aware of their lousy two tier policy with new and existing treated vastly different.

I have a SVR mortgage at KBC but they failed to pass on the Oct 2015 reduction they gave to existing customers as I was on a lower rate than 4.5%
They did however pass on all five increases from 2010 to 2014.

So when they finally after 2 years announce a cut in their variable rate for hard pressed existing customers it actually only applies to those paying their top rate, everyone else seems to be on an increase only internal list.

 

[Sarenco]

How could you be on KBC's standard variable rate (SVR) if the rate you were actually paying was lower than KBC's SVR?

Surely you were on an LTV based, individually negotiated, or some other form of discounted variable rate rather than the SVR - no?

 

[Pinesky]

How could you be on KBC's standard variable rate (SVR) if the rate you were actually paying was lower than KBC's SVR?

Surely you were on an LTV based, individually negotiated, or some other form of discounted variable rate rather than the SVR - no?

I think this is correct.Have you examined you loan documentation . I would doubt SVR is mentioned. From memory some banks in the UK tried to have 2 SVRs but were ruled against in the Courts .

 

[Silvio Dante]

Sarenco,

Correct, I was/am on what is called "the Saver Plus Variable Rate"
However, crucially (he says hopefully) both broker and KBC in all pre draw down negotiations confirmed this was a variable rate and I would be subject to all normal fluctuations in the variable rate as they arose.

Even if this wasn't the case I think it is wholly wrong.
Customers (even experienced ones) understand there are two distinct routes for a mortgage
Fixed and Variable
And customers understanding of each is clear.
Your fixed doesn't change for the period it is fixed irrespective of what happens.
Your variable rate changes when the bank announces an increase or decrease (providing it applies to existing customers)

There is no point in a bank offering you a variable rate mortgage even at a discount to their SVR if they can pass on all increases and not pass on reductions (which is exactly what has happened).
Broker, bank and solicitor never warned me this would or could happen.
No way would I have signed up to such a ruse, nor would my solicitor have allowed me to.
Quite the opposite, i was quite specific I didn't want a fixed rate I wanted a variable.
I didn't get a variable, I got a mortgage that KBC appear to have arbitrary authority to only levy increases on.

 

[Sarenco]

Silvio

I'm not trying to argue the rights and wrongs of KBC's mortgage pricing policy - I'm just pointing out that if you're not on their SVR then you don't really have a cause for complaint if they lower (or increase) their SVR.

You are absolutely right on one point though - a lender can adjust any variable rate mortgage that does not track an external reference rate at their absolute discretion. That's the deal you signed up for. If you are not prepared to accept this particular term of the deal, then a fixed rate product is your only other option.

Is there any possibility that you could switch lenders - either now or in the not too distant future?

 

[Silvio Dante]

Sarenco,

I know where you stand regarding banking ethics so no point in us falling out on that.
You believe anything a bank can get away with legally is fair game, caveat emptor, tough luck, read the small print etc
Banks are there to make money not friends.
That's your starting point and one you argue well but I don't agree with it.
Banks must have ethics, they cannot behave like three card trick merchants.

If I get a loan document that says "variable rate" (and that is exactly what is in my signed loan document) I believe I am entitled to expect all variable rate changes applied by KBC for existing customers to their variable rate over the course of my mortgage life to be passed on to me.
That's 100% what I asked for as I flatly rejected their fixed offer and 100% what I expected.
What's more on reviewing all my emails, my solicitor, KBC and broker were all of the same view.
The absence of "standard" is in your view game over, tough luck you got reamed, bank holds all the aces.

Maybe you are right, we will see.

 

[Sarenco]

Silvio

Again, I'm not arguing "banking ethics" (frankly, i don't even know what that means) or the rights or wrongs of KBC's mortgage pricing policy.

You are trying to argue that you are on KBC's SVR even though you have to date been paying a contractual rate that is less than KBC's SVR. Does that sound even remotely plausible?

But, yes, fundamentally I believe that if you make a deal with somebody then you should honour that deal. And, if necessary, you should be compelled by law to do so. The same basic principle should, of course, apply whether you are a lender or borrower. It's a basic legal freedom.

I appreciate that it's fashionable these days for a party to appeal to notions of "ethics" and "fairness" where an agreement turns out to be a bad deal from their perspective.

My attitude? Do a better deal next time.

Mind you, this is the first time I can remember anybody arguing that they actually signed up for an SVR!

Why do you think you are "entitled" (your phrase) to an equivalent reduction to a rate that another cohort of borrowers is paying? Ethics? Fairness? Or something else?

Again, is switching lender completely out of the question? Either now or in the not too distant future?

 

[cremeegg]

You are absolutely right on one point though - a lender can adjust any variable rate mortgage that does not track an external reference rate at their absolute discretion. That's the deal you signed up for.

Until recently the practice was that rate changes up or down were passed on to all borrowers. This is no longer the case. No rational person would take out a mortgage which the bank can charge any rate it likes. When the variable rate was the same for all customers, the need to attract new business prevented banks from putting the rates up unreasonably. That protection is no longer available to borrowers.

Of course a rational person might get a mortgage and not repay it. from Brendan's reports it appears that they would be able to live cost free in the property for many years.

This situation arises because our political system is broken.

If you are not prepared to accept this particular term of the deal, then a fixed rate product is your only other option.

I am not aware that a fixed rate mortgage for the term of the loan is available in Ireland.

 

[Sarenco]

No rational person would take out a mortgage which the bank can charge any rate it likes.

I don't necessarily disagree but the majority of borrowers (on the advice of most commentators) are taking out mortgages on precisely this basis. Are they all irrational? I think you could certainly make a good argument that they are.

Of course a rational person might get a mortgage and not repay it.

Yup, that would be a perfectly rational course of action. I have made that precise point a number of times on this forum.

I am not aware that a fixed rate mortgage for the term of the loan is available in Ireland.

Nor am I (assuming you are talking about an average mortgage term). Did you think I was suggesting otherwise?

 

[Silvio Dante]

Silvio

Again, I'm not arguing "banking ethics" (frankly, i don't even know what that means) or the rights or wrongs of KBC's mortgage pricing policy.

You are trying to argue that you are on KBC's SVR even though you have to date been paying a contractual rate that is less than KBC's SVR. Does that sound even remotely plausible?

But, yes, fundamentally I believe that if you make a deal with somebody then you should honour that deal. And, if necessary, you should be compelled by law to do so. The same basic principle should, of course, apply whether you are a lender or borrower. It's a basic legal freedom.

I appreciate that it's fashionable these days for a party to appeal to notions of "ethics" and "fairness" where an agreement turns out to be a bad deal from their perspective.

My attitude? Do a better deal next time.

Mind you, this is the first time I can remember anybody arguing that they actually signed up for an SVR!

Why do you think you are "entitled" (your phrase) to an equivalent reduction to a rate that another cohort of borrowers is paying? Ethics? Fairness? Or something else?

Again, is switching lender completely out of the question? Either now or in the not too distant future?

Sarenco

Taken directly from KBC's website on mortgage interest rates explained

Variable Rate

With a variable rate, your monthly repayments may rise or fall from time to time. If the variable rates fall your monthly repayment reduces, while if variable rates rise, your monthly repayment increases. Variable rates can be increased or reduced at the discretion of the lender.


Nowhere does KBC say there is a distinction between variable rate and standard variable rate and that is entirely consistent with all my correspondence and entirely consistent with all discussion in that correspondence among the participants (including KBC).
My contention will be there was none and there is none and KBC's own website appears to concur.
If there were any KBC should make that distinction clear on their own website explaining their products.

I am happy with my position and believe KBC's position is nowhere near as robust as you believe but let's see how it progresses.

 

[Sarenco]

I am happy with my position and believe KBC's position is nowhere near as robust as you believe but let's see how it progresses.

Grand - you should seek your remedy in the Courts. I think you would be wasting your time but I'm delighted that you are happy with your position and I would be thrilled to be proved wrong.

Variable rates can be increased or reduced at the discretion of the lender.

That's really the key phrase. In this case, KBC has decided to exercise their discretion not to reduce your discounted variable rate while at the same time exercising their discretion to reduce their SVR.

Do you think there is a distinction between trackers and SVRs? They are both variable rates after all.

Can I assume that switching lenders, now or in the not too distant future, is not on the cards? That's really the best way to improve your position.

 

[Brendan Burgess]

Hi Silvio

Sarenco has made a very important point which I missed when I saw your original post.

You are not on an SVR. You are on a different type of variable rate. What happens to the SVR is completely irrelevant to you and should not be figuring in any complaint you make to KBC or to the Financial Services Ombudsman. This is really important. If you make a complaint on this basis, you are destined to lose. I have seen many good complaints rejected by the FSO because they were carelessly worded.

There is no point in a bank offering you a variable rate mortgage even at a discount to their SVR if they can pass on all increases and not pass on reductions (which is exactly what has happened).

Ulster Bank offers mortgages with a rate specified as "SVR - 0.5%". I assume that this is not anywhere in your documentation or communications with KBC? If it is, you may have a case on getting the SVR cut.

However, crucially (he says hopefully) both broker and KBC in all pre draw down negotiations confirmed this was a variable rate and I would be subject to all normal fluctuations in the variable rate as they arose.

It is really important what the wording here is. If KBC told you that you would get cuts as mortgage rates fell, then I think you have a good case. If your broker told you, then your case may be against your broker.

Broker, bank and solicitor never warned me this would or could happen.

The solicitor has no role here in my opinion. They don't give financial advice.
I think that the broker may be liable. I have no idea why any mortgage broker recommends KBC these days without warning the client that KBC does not pass on rate cuts to existing customers. However, as you took out your mortgage in 2010, before KBC introduced this policy, then I don't think you have a case against your broker. Your broker should have sent you a Reasons Why letter telling you why they recommended KBC.

So do you have a valid case against KBC?

I think that you do. Sarenco correctly points out that they are treating you in line with the contract. So KBC can raise the rate to 20% tomorrow and point out that the contract gives them absolute discretion to do so.

However, there is a fundamental requirement of the Code of Conduct on Mortgage Arrears to treat customers fairly. In my view, it is not fair to pass on rate cuts to some customers and not to pass them on to others. I suppose that "fairness" is subjective and, ultimately, it would be the Central Bank, the High Court or the FSO who would decide that.

You have to get all your documentation and check it for references to interest rate cuts. You will need to find advertising from the time. (For example, I consider the "no gimmicks" advertising currently used by KBC to be misleading.)

Send in a Data Protection request to KBC and to your broker before you submit your final complaint to the FSO or to KBC. You never know what you might find there.

What are your chances of success?
I think that the best route is publicity and pressure on the Central Bank and the government to make sure that lenders cannot treat existing customers differently from new customers.

Brendan

 

[Silvio Dante]

Thanks Brendan,

Good stuff all round.

I will ensure FSO only receives specific references to what was contained in loan documentation.
That is clearly "variable rate 3.07%", nothing more nothing less.

I will scour press releases since draw down to check wording.
KBC cut their variable rate for existing by 25bps in November 2011(effective Dec 1st).
Would you have an archive copy of announcement to see if the wording differs from last October's cut?

I firmly believe most (possibly all) KBC variable rate customers drew down their mortgages as simply "variable" and KBC have now come up with an incredibly devious (and in my view highly dubious) strategy that any announcement on interest rate decreases will reference "standard variable rate"
So if you got a slightly better rate than this at draw down, you will be excluded.

Therefore the problem has got a lot worse than just not passing on cuts to existing customers, they have added another massive leg.
They will exclude anyone who got a slightly better rate at draw down from these cuts while getting all the headlines "KBC announce another rate cut"

I think from a PR perspective this will be huge if as I suspect they will pull this stunt on new customers they have recently lured in with lower rates.
They have been in vanguard of offering better rates to new customers but will surely cop enormous flak from this group if they pull the "we are delighted to announce a reduction in our standard variable rate from 4.25% to....." thereby excluding all recent new customers from what any reasonable observer might conclude to be a variable rate reduction.

Could I ask anyone who got even a slightly preferential rate on draw down form KBC in last year to let me know if they were excluded from last October's decrease?

 

[gnf_ireland]

the Saver Plus Variable Rate"

Simple question on this - is the Saver Plus Variable Rate defined ANYWHERE in the documentation? Surely it is somewhere? If not, what did you understand you were signing up to, and what does your home loan documentation say

From the date your home loan was taken out, did the Saver Plus Variable Rate move with changes in the SVR rate up to a certain point - so upward and downward? Did KBC make any announcements regarding movements in the Saver Plus Variable Rate.

Are you able to access the KBC website archives (web.archive.org or something may be able to assist you here) to see how this variable rate was defined

I think central to any complaint here will be the definition of the Saver Plus Variable Rate.....

 

[demoivre]

Anyone know the definition of a Flexiannuity rate? How does it differ from a standard variable rate? Google doesn't give much insight.

 

[Brendan Burgess]

These are not standard worldwide product names.

They are the names given to mortgages by particular lenders. For example, ptsb has a Managed LTV rate which is replacing their Standard Variable Rate.

So "flexiannuity" or "Saver Plus Variable Rate" are not usually defined as such. The terms and conditions should be set out in the loan offer. I suspect that the wording will be very similar: "The lender can vary the rate at its discretion.".

So unless you can find the lender saying something like "The advantage of a variable rate over a fixed rate is that it can/will go down when rates fall.", you won't have a legal challenge.

However, that does not mean that you don't have a case for the FSO or for the Central Bank. In my opinion, any lender which reduces the rates for new customers, but not for existing customers, is in clear breach of their obligation to treat customers fairly.

KBC has never made it clear to borrowers that they would not be getting the rate cuts which new customers are getting. In my view, this is a key feature of the product and as such, they were obliged to notify potential customers of this fact. They didn't, so they could be accused of mis-selling.

If they treat all customers the same and don't pass on rate cuts to anyone, then you have probably no case.

 

[gnf_ireland]

@Brendan Burgess

As you know I have a slightly different view on some of this. I believe that the bank define products and therefore they should be called out in the terms and conditions of the loan offer. The details I have from KBC shows that there were 4 types of products available to me:
- fixed
- variable
- tracker (clearly states this is a specific type of variable product)
- split

If a bank is creating 'artificial (sub)products' then it is up to them to define them clearly. It should not be accepted to have products such as SVR1, SVR2, SVR3, SVR4 etc etc all linked to thin air.

KBC has never made it clear to borrowers that they would not be getting the rate cuts which new customers are getting. In my view, this is a key feature of the product and as such, they were obliged to notify potential customers of this fact. They didn't, so they could be accused of mis-selling.

100% agree, and this is definitely the case for the current LTV products they are selling (in my view) as it is the same product. But what about these other 'legacy' products which may not have been defined. This is where the complexity lies.

It goes back to the lack that contracts that allow banks to create new products, not define them, not allow customers to change them and treat them as upward rate increases only - WITHOUT CLEARLY STATING THIS - is misselling ! We are all in agreement here I imagine

 

[Silvio Dante]

Simple question on this - is the Saver Plus Variable Rate defined ANYWHERE in the documentation? Surely it is somewhere? If not, what did you understand you were signing up to, and what does your home loan documentation say

Nowhere, only reference anywhere in signed loan docs refers solely to "variable"

From the date your home loan was taken out, did the Saver Plus Variable Rate move with changes in the SVR rate up to a certain point - so upward and downward? Did KBC make any announcements regarding movements in the Saver Plus Variable Rate.

Every time, until last October.
5 Increases and one decrease.

Are you able to access the KBC website archives (web.archive.org or something may be able to assist you here) to see how this variable rate was defined

No and a google search offers zilch

I think central to any complaint here will be the definition of the Saver Plus Variable Rate.....

See answers in above