Kafka v Derbyshire Home Loans

[Kafka]

This is a complex one that needs a little background first.

After moving in 2004, I managed a remortgage in Feb 2006, to a cheaper-rate deal tied for 2 years. This was with Kengsington Mortgages who speaialised in sub-prime borrowers (but have recently pulled out of the sub-prime market). The rate was 6.7% and I expected to move to a cheaper deal after it ended. In the agreement, the rate was likely to rise to about 8.5%, should I stay with them.

A few months after taking the mortgage out, it was transferred to Derbyshire Home Loans, with an assurance that the conditions of the existing agreement would be honoured. I don't believe I signed anything and they assured me that the only thing altering was the detail of the actual provider.

With the current credit squeeze and my situation, it is doubtful at the moment whether I can get a remortgage on this house. Even if I could, I have a major landslip problem caused by work done by the previous owner, that I have an insurance investigator and a solicitor pursuing (for a year now). If I sell or remortgage before this is resolved, then I stand to lose 20-30k from the house value, so I planned to hold on to the current mortgage after the rate increase in Feb, until the landslip is sorted and I can remortgage/sell when the time is right, which plainly is not now.

After hearing nothing in advance about the new rate, I have now been informed that from March they intend to charge 10.1%, with no explanation of why the rate is so high, nor what the type of mortgage this is. I have never missed a payment with them, so there is no justification for charging any excess.

With the current level of interest rates I can see no explanation for this ridiculous rate, other than the fact that they presumably know I will struggle to remortgage and are trying it on as they realise I have little option elsewhere. If they try this with all sub-prime borrowers, then many will pay their rate and those that cannot will simply default and sell up. Either way they can't lose.

In view of the fact that this rate is plainly excessive compared with the agreement, I am wondering whether there are grounds to challenge it as it cannot be justified within the spirit or the letter of the agreement that has not been changed.

Any thoughts please?

[Nattie]

Re: Kafka v Derbyshire Home Loans

How do the sub primers work out their mortgage rate? Is there a calculation that they would make ie base rate plus x%?

[Nattie]

Re: Kafka v Derbyshire Home Loans

http://www.saltfinance.co.uk/
the trading name of Derbyshire home loans.

Interesting demo would you say?
http://www.saltfinance.co.uk/flash/online_process.swf

[Kafka]

Re: Kafka v Derbyshire Home Loans

How do the sub primers work out their mortgage rate? Is there a calculation that they would make ie base rate plus x%?

This is the crux of the issue.

When I signed the agreement it was done with the understanding that there was a limit to the rate after 2 years, allowing for base rate fluctuations. Had there been any suggestion that this could be 10.1%, or that they could set any rate they liked, then I would never have agreed to this mortgage.

As far as I can see the original agreement has never been replaced, yet they are clearly ignoring the indicative rates stated in the agreement.

[Nattie]

Re: Kafka v Derbyshire Home Loans

I think you need them to produce that original copy because within that may be a an agreement of say base rate plus for example 5%. that would still make it expensive but not as maybe it is at the moment.

[Kafka]

Re: Kafka v Derbyshire Home Loans

How do the sub primers work out their mortgage rate? Is there a calculation that they would make ie base rate plus x%?

I have now been through all of the documentation and this seems to be the smallprint that an argument would hinge on.

Feb 2006
Kensington Mortgages agreed mortgage at a fixed rate of 6.7% until Feb 2008 followed by Kensington's Standard Variable Rate currently 5.7% plus 2.4% currently 8.1%

"The terms of the mortgage reflect past or present financial difficulties" (although I have never missed a payment since, so that cannot be used as a current argument now).

May 2006

Kensington informed me that from April 2006 the mortgage had been transferred to Derbyshire Home Loans Limited for all administration etc.

(Kensington) "In addition, DHLL will be responsible for setting interest rates and charges on your mortgage from the change of ownership." I was given no option on this other than a query helpline and never signed a new agreement.

(Kensington) "KMCL and DHLL have worked closely to ensure that the transfer of your mortgage will limit any inconvenience for you. Importantly, in accordance with the terms of your mortgage, there will be no adverse change to the current terms and conditions of your account."

(Kensington) "You do not need to take any further action, as the transfer of your Direct Debit will take place automatically. The only change that you will notice will be the different name on your bank/building society statement..."

(Derbyshire) "I am pleased to welcome you..."

(Derbyshire) "The terms of your mortgage remain the same and you need make no changes to how you pay..."

Feb 2008

"We are writing to advise that your mortgage has come to the end of its fixed rate term We confirm this results in an amendment to the rate of Interest/Interest Rate applied to your account.

The rate of Interest/Interest Rate that shall apply from 1st March 2008 is 10.1%"

In summary, they have added 2% to the anticipated rate due after the two years, with no explanation. This plainly does not reflect a massive increase in base rate either, so presumably if the interest rate goes up they will just keep increasing this rate at every opportunity.

The question now is what I can do to fight this. Although they have worded it so that they can vary the rate, this clearly does not maintain the T&Cs as stated and does not reflect either the letter or the spirit of the only signed agreement.

I've not spoken to them yet, so want to know what options I have here for appealing, perhaps to the regulators? Any ideas?

I've never ever heard of a mortgage rate this high. Presumably they hope that they can make a killing if they get away with this, or else they will force me to sell up now, which might be advantageous to them just in case the property values slumped leaving them exposed. Either way this is sharp practice for anyone to see.

[Amethyst]

Re: Kafka v Derbyshire Home Loans

I don't know Kafka, have been reading about some and christ almighty this Derbyshire Home Loans outfit sounds awful.


I suspect there has been no change to the terms and conditions - just Derbyshire homes Loans current SVR is much higher than Kensingtons to begin with. I can't find anything formal on the net, and lots of people appear to be having similar problems with mortgages transferred over to DHL from Kensington and Platform.


FSA register FSA Register


Sorry this isnt much help. They basically seem to do what the hell they please and get away with it.

I'm not sure I understand the reasons for not remortgaging now. I get the not selling bits okay. Would you not be able to remortgage at the same amount you have on it now with Derbyshire but with another lender ?






'Salt' is a trading name of Derbyshire Home Loans Limited which is a wholly-owned subsidiary of Derbyshire Building Society. Registered in England and Wales. Company registration number 2628265. Registered office: Duffield Hall, Duffield, Derby, DE56 1AG. Status Disclosure.

[Kafka]

Re: Kafka v Derbyshire Home Loans

I'm not sure I understand the reasons for not remortgaging now. I get the not selling bits okay. Would you not be able to remortgage at the same amount you have on it now with Derbyshire but with another lender ?

There are several reasons. I bought the house based on a valuation of March 2004. That year and the next saw unprecedented rises in values.

When I remortgaged I was keen to improve the loan-to-value ratio. However, a large unusual property in a rural area is difficult to value, and for reasons that I never understood the house had effectively not appreciated between March 2004 and Dec 2005 when it was last valued. This was a problem because I lost so much equity moving there when everything went wrong.

Whatever it would value at now, the problem with the landslip is likely to remove something like 30k from the value. That, coupled with other recent issues, mean that I am likely to have major problem remortgaging now, with a high value mortgage, an unfavourable income-to-loan ratio (that has improved) and a need to self cert. My wife is currently with CCCS for debts and they have recommended Charcol as a helpful company, but I really do feel that there are just so many things stacked against me at this time. Ironically, after a year of effort the landslip problem caused by the previous owner seems to be getting somewhere and I am hopeful that this will be sorted by the summer. However, that is also going to cost me 1000s even if the claim can be won, and I'll never find that now if i have to pay this rate of interest on the mortgage.

In my favour I have a perfect payment record, but putting all this together I feel I would probably not get a remortgage right now on this house. I had therefore expected to weather the higher rate for this year until things settle with work, the housing values and loans available. I am also expecting another one to go to uni in sept, so that might be a good time to look at selling and moving to a smaller and cheaper place.

The proper increase in rate was manageable, but the extra 2% means that I can't pay this even on a 6 month basis without something else going my way. Its simply trapped me, and if I only pay the amount as per the agreement, then that will ruin my perfect payment record, making it much harder to remortgage later.

[enaid]

Re: Kafka v Derbyshire Home Loans

Kaf have a look on here, there should be info on complaints procedure but also advice on your situation.

http://www.howtocomplain.com/cgi-php...orID=7&ID=3121

[Tools]

Re: Kafka v Derbyshire Home Loans

Just wondering how much notice they gave you of the interest rate rise. Reading your timeline it seems they gave you no notice whatsoever.

Surely there are guidelines/regulation as to how previous they have to inform you of such a drastic rate change. Even if they gave you one month, there isn`t much possibility of you re mortgaging with another company or renegotiating a better deal with Derbyshire Home Loans.

I know the rate was fixed for 2 years but was there any other tie in clause?

[Tools]

Re: Kafka v Derbyshire Home Loans

Found it, thought they were on work pc but have a read of this

[Tools]

Re: Kafka v Derbyshire Home Loans

From the good practices guide

(ii) Notification
4.6 Setting interest rates is a commercial, not a regulatory, decision. When firms
design product literature they must ensure that any information about what
the interest rate is and if, when and how it may change and how notification
of any such change will be given is clear, fair and not misleading.
4.7 In the case of variable interest rate accounts, one of the factors in deciding
whether rates are changed may be the Bank of England base rate or some
other external index. With tracker accounts there is a strict correlation
between the two but in other cases the link may be more implicit and a
separate decision about if, when and how to pass interest rate changes on to
consumers must be made by the firm. Variation clauses must be drafted in a
way which is fair having regard to, amongst other things, the power to change
rates and the power to decline to change rates, or to delay a change.
4.8 Interest rate variation terms should be plain and intelligible about whether
they track an external rate or not. In addition, firms must ensure that product
literature is clear, fair and not misleading, including as to whether the interest
rate will track an external rate.
4.9 A tracker account contains a variation clause which provides for interest to be
paid at a rate which follows, by a defined amount and within a defined
period, Bank of England base rate or some other external index. In our view,
such a variation clause is likely to be fair provided it has been drafted in
‘plain, intelligible’ language. Any product literature which describes the clause
should do so in a way which is clear, fair and not misleading. So long as the
clause governing the rate for a tracker account provides only for changes by
the defined amount20, it is likely to be fair. However, if a term of the contract
for a tracker account allows the firm to change the relationship between the
external rate and the rate applicable to the consumer, then that term will need
closer consideration as to whether it is fair.
4.10 Terms which govern notifying consumers of interest rate changes should be fair.
These terms also affect the fairness of interest rate variation terms. Whether a
term is fair takes into account the respective costs and benefits of different forms
of notification including, for example, personal notification. In our view,
16 Fairness of terms in consumer contracts: Statement of Good Practice
personal notification is likely to contribute to fairness. Personal notification is
likely to be less important in relation to a term which only allows changes to the
interest rate which reflect changes in an external benchmark. There may be
circumstances in which a term may fairly provide exceptions to the general
position on notifying consumers personally. A different form of notification, for
example in media and branch notices, may be appropriate, for example, for
accounts which contain only a small amount of money. Subscribers will wish to
refer to provisions of the Banking Code.
4.11 In deciding on how to notify consumers in practice, firms should consider all
terms in the contract as well as any expectations that they may have created in
product literature or other communications. It may be that, having considered
the costs and benefits of giving personal notification, firms wish to specify a
threshold (for example, by reference to the size of the change) below which
they would not normally expect to give personal notification. Subscribers will
wish to refer to provisions of the Banking Code.

[enaid]

Re: Kafka v Derbyshire Home Loans

Mortgage Regulation - A Guide - Money extra

[Amethyst]

Re: Kafka v Derbyshire Home Loans

which sections specifically Tools ? relating to the sale of the mortgage to DHL from Kensington. Notification of change of lender as well as change in interest rate.

[Kafka]

Re: Kafka v Derbyshire Home Loans

Just wondering how much notice they gave you of the interest rate rise. Reading your timeline it seems they gave you no notice whatsoever.

Surely there are guidelines/regulation as to how previous they have to inform you of such a drastic rate change. Even if they gave you one month, there isn`t much possibility of you re mortgaging with another company or renegotiating a better deal with Derbyshire Home Loans.

I know the rate was fixed for 2 years but was there any other tie in clause?

They only wrote to me with the new rate on 11 Feb, when the tie-in ended on 23rd. I suppose I should have chased this earlier, but for all of the reasons given above I knew there was probably nothing I could do and would have to weather the new rate for some months. I did check the paperwork, but that clearly states that the terms and conditions would not be changed adversely.

Even now they have never said why they have added 2%, nor what their SVR is. They have provided no detail and have basically concealed this significant change to the terms until the last few days.

All relevant facts have been provided above and there are no other tie-in clauses.

Should I ring them first to ask for some explanation first?

After that clearly they need it in writing. Should this be approached with a view to a complaint to FOS?