Money Grouse: When two building societies become one

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When a building society is taken over, it does not automatically mean that the base rates of the two societies are merged.

Glen Hodgson from Ealing, London, took out a pounds 15,000 mortgage with Guardian Building Society in 1985.

The building society was then merged with Cheltenham & Gloucester building society.

Following the cut in base rates at the end of last year, Cheltenham & Gloucester decided to cut its variable rate for its existing borrowers to 7.64 per cent with effect from December 31, 1993.

Mr Hodgson then received notification from the society that his mortgage rate was to be cut to 7.89 per cent - 0.25 per cent above the rate for existing borrowers.

Mr Hodgson wrote to the society to complain about the differential rates.

The society wrote back and said: 'As you are aware your account is an ex C&G Guardian mortgage and their base rate was 0.25 per cent higher than ours and this increase will remain for the whole term of the mortgage.'

Mr Hodgson also objected to the fact that the reduction in the rate was passed on one month later than the reduction to other Cheltenham & Gloucester borrowers.

But the society said that part of the contractual terms signed by Guardian borrowers was that they would be given a month's notice of mortgage rate changes.

When the Guardian was taken over all borrowers were told that the contractual terms of their loans would not be altered.

It added that for a pounds 50 fee Mr Hodgson could switch to the lower rate.

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