The Skipton Building Society has decided to scrap their Mortgage Promise, it turns out it wasn’t worth the paper it was written on. Their Mortgage Promise customers have been informed that as of the 1^st March 2010 their Standard Variable Rate (SVR) will rise by 1.45% from 3.5% to 4.95%, despite the fact that the building society’s promise was that their SVR would never be higher than 3% above the Bank of England Base Rate.

The building society sector as a whole has seen major moves in the last two months to raise SVRs in order to protect the margin they make on mortgages. Skipton’s issue was that during the good times they made a promise that they couldn’t keep in the bad times. The institution based in the north of England has therefore taken the decision to scrap the mortgage promise under an “exceptional circumstances" clause.

The affected customers have been given the choice of accepting the change in the SVR or to move their mortgage to another provider with no penalty being imposed by Skipton. It has been estimated that their actions will affect approximately 64,000 mortgage customers.

As a building society Skipton work under the concept of mutuality, whereby the institution is meant to be run on behalf of its members i.e. the savers and the borrowers by a board that has the interests of its members at their heart and not for the benefit of shareholders.

However, this action suggests that the Skipton is being run as a business without much in the way of thought for the member of this mutual society. This isn’t the only instance in recent times that Skipton are no longer adhering to the ethos of mutuality. The recent sales of a subsidiary company, Callcredit, for £100million did not result in any windfall for its members.

Skipton also recently acquired the Scarborough Building Society which does beg the question: if their finances are in bad enough shape for them to break promises they made to their existing members and for them to jeopardise their standing in the financial community should the acquisition have been allowed to go ahead?

All in all a very bad situation for Skipton to find themselves in, however they have made it worse by handling it in such a shoddy manner. The key questions now are can they survive this public relations blunder and can they be considered a mutual society in the future?