Why do Banks offer different svr mortgages for new as oppose to existing customers

The Irish banks are getting away with this practice but not for much longer I hope.Some of our banks recently reduced SVRs to existing and new customers at the same rate.
 
At the time I was in UK and mortgage with HSBC I got fobbed off, Someone went further to FSO and won. As a result HSBC were ordered to make everyone whole.., I got 2k GBP back

By rights you could challenge here too
 
In Ireland how come there are different svr mortgages available for new as opposed to existing customers? The Financial Ombudsman office in the UK seem to frown on same, see link below


http://www.financial-ombudsman.org.uk/publications/ombudsman-news/21/complaints-dual-variable.htm


It is simply untrue to imply that the UK's FSO has any issue with banks charging different variable rates to different customers. In fact, in the linked report the Ombudsman specifically states as follows:

"We have never said that lenders cannot have more than one variable rate".

The lead cases summarised in the report are far more nuanced than the OP is implying and had nothing to do with different variable rates being charged to new and existing borrowers.

I am personally of the opinion that some form of legal protection is warranted for borrowers that are not in a position to refinance their mortgages (due to a lack of equity in their properties or reduced income) and I have suggested a formula in this regard on another thread.
 
At the time I was in UK and mortgage with HSBC I got fobbed off, Someone went further to FSO and won. As a result HSBC were ordered to make everyone whole.., I got 2k GBP back

By rights you could challenge here too

Challenge what exactly?
 
Sarenco,

You did not complete the quote,

"We have never said that lenders cannot have more than one variable rate. We have decided the lead cases on the basis of what rate those borrowers were entitled to in the light of their mortgage contracts and the legitimate expectations they were entitled to have under those contracts."

Legitimate expectations Sarenco, do you know what that means with regards to contract law?

This is a consumer forum to advise and help consumers, it is not a platform to dash consumers hopes of legal recourse against the banks in this Country that have acted,in some cases, deplorably.
 
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Sarenco,

You did not complete the quote,

"We have never said that lenders cannot have more than one variable rate. We have decided the lead cases on the basis of what rate those borrowers were entitled to in the light of their mortgage contracts and the legitimate expectations they were entitled to have under those contracts."

Legitimate expectations Sarenco, do you know what that means with regards to contract law?

This is a consumer forum to advise and help consumers, it is not a platform to dash consumers hopes of legal recourse against the banks that have acted,in some cases, deplorably.

The doctrine of legitimate expectation, as developed by our courts, has nothing to do private contract law. The FSO does not decide cases purely on the basis of contract law - it is not a court.

In any event, the UK's ombudsman did not criticise lenders for offering different variable rate mortgages to new and existing borrowers as you originally suggested.

Yes, this is an open forum that is intended to advise and help consumers. I take the view that deliberately or innocently misrepresenting legislative provisions and/or the decisions of any court or ombudsman does no service whatsoever to consumers.
 
Sarenco,

I never said it was, but the Financial Ombudsman found against certain banks in England who had dual variable rate mortgages, due to their respective mortgage contracts, BUT ALSO due to the LEGITIMATE EXPECTATIONS that the mortgagors had when they entered these contracts. This is hard fact that even you cannot deny. Consumers in this Country, which has the same common law background as the UK, are also entitled to the concept of legitimate expectation, in fact the unfair terms in contract regulations that this Country transposed into Irish law enforces this concept. The ECJ has given instruction on this particular matter. This can be used as a useful weapon by consumers to bring financial institutions to heal if the consumer believes they have been wronged.

In relation to your last paragraph you may enter conversation mode with me to back up your skewed views of my posts.
 
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Safe co,
I never said it was,but the Financial Ombudsman found against certain banks in England who had dual variable rate mortgages, due to their respective mortgage contract BUT ALSO due to the LEGITIMATE EXPECTATIONS that the mortgagors had when they entered these contracts.

You asked me if I knew what legitimate expectations means with regards to contract law. I do as it happens - nothing.

Yes, the UK's ombudsman did find against lenders in specific circumstances where they applied different variable rates to certain categories of borrowers. I think most reasonable people would struggle find fault with any of these decisions. However, you are extrapolating some wider principle from these decisions that is simply not there.
 
If a lender breaches the legitimate expectation that a consumer would have had when they entered a contract, the contract may be challenged. A current and very interesting Irish case of - Millars v FSO and Danske Bank partly alludes to same. So Sarenco, for the record, are you stating on this forum that Judge Gerard Hogan was wrong to bring up the matter of legitimate expectation, as in your narrow view, it has nothing to do with the overall matrix of fact, when entering a contract.

I believe it is you and not I that is either deliberately or innocently misrepresenting the law as it currently stands. I believe your arguments on matters of law in this instance may lack credibility. Correct interpretation of law is just as important as the law itself!
 
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Mr Justice Hogan did not "bring up the matter of legitimate expectation" in the Millar case.

The Court determined the issue under dispute on the basis of common tenants of contractual construction - nothing to do with the doctrine of legitimate expectation. Specifically, the Court held that the Ombudsman erred in concluding that the words at issue were clear and unambiguous and he had further erred in not having regard to extrinsic evidence which might inform the meaning of those words. The Court also found that the Ombudsman failed to give consideration to whether the complainants could successfully establish a collateral contract regarding the meaning of these words having regard to the promotional and other material supplied by the Bank at the relevant time.

Accordingly, the court found that the decision reached by the Ombudsman “was vitiated by a serious and significant error or a series of such errors” and it made an order setting aside the decision of the Ombudsman and remitting it for a fresh determination in a manner not inconsistent with the judgment. My understanding is that the FSO has now appealed this decision.

I am happy to rely on the good judgment of other forum users as to the credibility or otherwise of your legal analysis.
 
Judge Hogan, did bring up the matter of legitimate expectation when giving his Judgment, in the context of the Financial ombudsman's failure to give consideration to the possibility of the Millars being able to establish a collateral contract with regard to Danske's bank marketing and other promotional material supplied by Danske at the appropriate time. Study the Judgment again. In other words, the Millars had a legitimate expectation regarding the performance of the contract by Danske Bank, that the variable interest rate would follow market conditions ( qualifying term in variable rate mortgage clause ) but also the Millars had a legitimate expectation as to a certain performance of the contract by Danske Bank due to the various marketing and website descriptions utilised by Danske bank explaining what a variable rate mortgage was.

As for your last comment I have no time for sycophants.
 
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http://www.courts.ie/Judgments.nsf/0/8869D07E6601DFD480257D66004ED374

Here's a link to the judgment. The words "legitimate expectation" do not appear anywhere in the text.

As regards the possibility of establishing the existence of a collateral contract, Mr Justice Hogan stated as follows:-

"But even if the parties were to be confined to the ordinary law of contract and even if (contrary to my view) the term was not regarded as ambiguous, the Ombudsman would nonetheless have also been obliged to examine the question from a slightly wider perspective. If, for example, the Millars could establish that the definition of variable rate mortgage contained in Danske’s website was one which was brought to their attention prior to entering into the contract, then they may – possibly - be able to establish by reference to sufficiently cogent evidence the existence of a collateral contract regarding the meaning of the term variable interest rate: see generally Allied Irish Banks plc v. Galvin [2011] IEHC 314, Tennants Building Products Ltd. v. O’Connell [2013] IEHC 197 and Irish Bank Resolution Corporation v. McCaughey [2014] IEHC 230. In other words, the Millars might be able to establish that they were induced into entering these loan agreements by reference to a definition of variable rate mortgage contained in documentation supplied by Danske and from which Danske could not now in either law or in conscience be permitted to resile, even if that definition differed from the meaning ascribed to variable interest rate mortgage contained in clause 3. In that respect, the common law rules regarding collateral contracts have affinities with their equitable cousin, the doctrine of promissory estoppel."

In other words, the Court found that the Ombudsman failed to give consideration as to whether the complainants could successfully establish a collateral contract regarding the meaning of the words in the mortgage agreement, having regard to the promotional and other material supplied by the Bank at the relevant time.

Nothing to do with whether or not the complainants in the Millar case had a legitimate expectation as suggested. And certainly nothing to do with whether or not there is something unlawful about offering different variable rates to new and existing contracts as implied in your initial post.
 
I believe you are wrong in your interpretation of this judgment. The judge clearly does not have to mention the actual words "legitimate expectation" when sanctioning the financial ombudsman do for his failure to even consider the possibilities of a Millars being able to establish a collateral contract in the context of the case. You know this as well as I do. It seem to me you like you get too involved in semantics and do not look at the issue from a broader legal perspective, ( a bit like the F.S.O ).

The financial Ombudsman in the UK stated in relation to the lead cases that it investigated that "on the basis of the rates that those borrowers where entitled to in light of their mortgage contracts and the legitimate expectations they (the mortgagors) where entitled to have UNDER THOSE CONTRACTS." Therefore the Financial Ombudsman in the UK believes that mortgagors can have legitimate expectations under contract, but you deny this. Someone is wrong!! Guess who?


Irish borrowers who have legitimate expectations under their contract as to what the svr mortgage rate should be, can also complain to the F.S.O. in Ireland, like borrowers did in the UK.
 
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Sarenco,

The Financial Services Ombudsman in the UK also explains by way of background as a reason why it took action against English Banks in relation to having two different svr mortgage rates, one for new customers and one for existing customers:


"The single variable mortgage rate was seldom linked directly to any external benchmark. So the lender was in a much more powerful position than the borrower, because the lender could vary the interest rate from time to time.

So why did borrowers enter into such an apparently one-sided bargain- The one-sidedness was mitigated, to a very limited extent, by the Unfair Terms in Consumer Contracts Regulations and the Consumer Credit Act. But many borrowers know little or nothing of these.

The main reason, as lenders well knew, was because borrowers had a legitimate expectation that their lender intended to retain its customer base in a competitive market, and would set its available going rate for no-frills mortgages accordingly.

It would defeat that legitimate expectation if the standard variable rate ceased to be one where the lender competed in order to retain its existing borrowers. That would be especially important where existing borrowers were tied-in and had to pay an early repayment charge to escape."


Food for thought, from a Governmental point of view, in light of the recent meetings of Minister Noonan with the six main banks! Time to wave this BIG STICK at the banks.
 
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I believe you are wrong in your interpretation of this judgment. The judge clearly does not have to mention the actual words "legitimate expectation" when sanctioning the financial ombudsman do for his failure to even consider the possibilities of a Millars being able to establish a collateral contract in the context of the case. You know this as well as I do. It seem to me you like you get too involved in semantics and do not look at the issue from a broader legal perspective, ( a bit like the F.S.O ).

The financial Ombudsman in the UK stated in relation to the lead cases that it investigated that "on the basis of the rates that those borrowers where entitled to in light of their mortgage contracts and the legitimate expectations they (the mortgagors) where entitled to have UNDER THOSE CONTRACTS." Therefore the Financial Ombudsman in the UK believes that mortgagors can have legitimate expectations under contract, but you deny this. Someone is wrong!! Guess who?


Irish borrowers who have legitimate expectations under their contract as to what the svr mortgage rate should be, can also complain to the F.S.O. in Ireland, like borrowers did in the UK.

I am not interpreting anything. I am simply continuing to correct your inaccurate and misleading statements as to what is stated in various legislative provisions, court judgments and ombudsmans' reports.

You can extrapolate whatever you see fit from these sources but please present them as your opinions - not as statements of fact.
 
Sarenco,

The Financial Services Ombudsman in the UK also explains the following background as a reason why it took action against English Banks in relation to having two different svr mortgage rates, one for new customers and one for existing customers:


"The single variable mortgage rate was seldom linked directly to any external benchmark. So the lender was in a much more powerful position than the borrower, because the lender could vary the interest rate from time to time.

So why did borrowers enter into such an apparently one-sided bargain- The one-sidedness was mitigated, to a very limited extent, by the Unfair Terms in Consumer Contracts Regulations and the Consumer Credit Act. But many borrowers know little or nothing of these.

The main reason, as lenders well knew, was because borrowers had a legitimate expectation that their lender intended to retain its customer base in a competitive market, and would set its available going rate for no-frills mortgages accordingly.

It would defeat that legitimate expectation if the standard variable rate ceased to be one where the lender competed in order to retain its existing borrowers. That would be especially important where existing borrowers were tied-in and had to pay an early repayment charge to escape."


Food for thought, from a Governmental point of view, in light of the recent meetings of Minister Noonan with the six main banks! Time to wave this BIG STICK at the banks.

I'm not sure what point you are making here but I believe that some legal protection is warranted for borrowers that are not in a position to refinance their mortgages as stated on previous threads.
 
The point I am making is this; Irish borrowers contracted into svr mortgage with the various banks because they had a legitimate expectation that the bank with whom that they entered contract with, intended to retain its customer base and would set it's no frills svr accordingly. This is of course not the case, instead we have an anti competitive monopoly of banks, who are gouging their customers with ridiculously high variable rate mortgages at a time when their respective cost of funding are at historic lows. The Financial Ombudsman in the UK took action against the banks in this regard. I hope I am making my point clearly and not extrapolating too much.

Yes, I do mean sycophants, and may I add, your supercilious attitude does you no favour either. I only return smart comments when they are directed at me in the first instance. You are the one whom, from your posts, purports to be an authority on law. Maybe you too could start offering an opinion, as oppose to some authoritative view. But enough of this sparring, let us agree, that we disagree with each other on the matter. Let some other posters express their view on this topic.
 
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Advice,

I hate to jump into the middle of this engaging contretemps, however, just to be clear, is this influencing your view? -:

“In other words, the Millars might be able to establish that they were induced into entering these loan agreements by reference to a definition of variable rate mortgage contained in documentation supplied by Danske and from which Danske could not now in either law or in conscience be permitted to resile, even if that definition differed from the meaning ascribed to variable interest rate mortgage contained in clause 3.

In that respect, the common law rules regarding collateral contracts have affinities with their equitable cousin, the doctrine of promissory estoppel.”

[Emphasis mine]
 
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