Halifax, the UK’s largest mortgage lender, announced yesterday that it is putting aside a total of £500million to compensate customers affected by changes to its mortgage Standard Variable Rate (SVR).
Before October 2008, Halifax’s SVR was capped at 2% above the Bank of England Base Rate, but it was then changed to 3% above Base Rate “as a result of extenuating economic circumstances” (the Bank of England was in the process of slashing interest rates from 5% to 0.5%).
The cap should have only applied to borrowers tied into their mortgage with Early Repayment Charges, however Halifax has now admitted that confusing wording in its mortgage offer documents may have mistakenly led thousands of other borrowers into believing that the cap also applied to them.
Consequently, many borrowers were not informed when Halifax, now part of Lloyds Banking Group, changed its SVR cap in October 2008.
The lender will write to approximately 600,000 customers from April and it expects to make goodwill payments totalling £500million to around 300,000 customers.
Halifax has said that customers do not need to take any action and those affected will be contacted proactively. There’s a useful Q&A on the lender’s website and customers with any questions can call 0800 1412146.