Leading mortgage lender Halifax has agreed to pay out compensation totalling £500 million, after failing
to clearly inform more than half a million customers about potential increases on its standard variable
mortgage rate.
The bank – now part of Lloyds Banking Group – has reached a voluntary agreement with banking
regulator the Financial Services Authority (FSA), because it accepted that the wording of mortgage offers
may have been potentially confusing.
The issue could have affected up to 600,000 mortgage customers who received their mortgage offer
between 20th September 2004 and 16th September 2007, and who still held the same mortgage in
January 2009.
The mortgage offers issued at the time said that the interest rate on the Halifax Standard Variable Rate
(SVR) mortgage would be capped at 2 per cent above the prevailing Bank of England base rate.
However, Halifax removed this cap from their mortgage terms and conditions in September 2007 and
the SVR was increased to 3 per cent above the bank base rate in October 2008. This was as a result
of “extenuating economic circumstances”.
Despite customers being given the impression that Halifax would inform them if the cap was ever
changed, the exact wording of the mortgage offer meant they would only have to contact mortgage
customers who held part of their mortgage on the SVR, and also had part on another deal with early
repayment charges.
At the time, customers were told their monthly payments were changing – but it wasn’t made clear that
this was due to the interest rate cap increasing from 2 to 3 per cent. For many, the change in policy
would have been ‘hidden’ by the rapid drops in the Bank of England base rate around the same time.
The bank has stated that it will contact all mortgage customers who have been affected, and around half
of them would be entitled to compensation. It said: “Halifax is committed to operating with the highest
levels of integrity and treating customers fairly and felt that a proactive co-ordinated programme to
contact affected customers and make goodwill payments was the appropriate course of action.”
The refund amount could be anything between a few pounds and a few thousand pounds per customer,
and will be calculated based on the difference between the actual mortgage payments, and what the
payments would have been if the cap had remained at 2 per cent.
The FSA have confirmed that: “We have been in discussions with the firm and have agreed the actions
they’ve outlined today.”
