by Mark Johnston
Lloyds banking group has set aside £500 million to voluntarily redress an estimated 300,000 Halifax customers who were potentially confused by its standard variable rate (SVR) cap.
The ‘mistake’ carried on between 2004 and 2007, when the Halifax was also busy writing bad mortgage business that it needed rescuing by Lloyds, then the taxpayer. It was only when the Halifax was substantially under state control that it finally agreed to ay the price for its mistakes.
Lloyds wrote directly to 600,000 Halifax customers in April 2011 to let them know about the redress programme. The money set aside however will cover all costs to the lender, including contacting customers and goodwill payments.
This redress programme was specifically for customers who were made mortgage offers by the bank of Scotland under the Halifax brand between September 2004 and September 2007.
The problem arose when the Halifax decided to change the maximum level of its standard variable rate (SVR). Its standard variable rate (SVR) cap was originally set at 2% above the bank of England’s base rate but Lloyds said it was raised to 3% above base rate. This potentially added hundreds of pounds to borrower’s annual interest bills and customers were not told about the changes made.
The Financial Service Authority (FSA) looked in to this and was concerned that some borrowers may have been misled by the wording of their offer document and therefore they ruled that borrowers might not have realised that the cap on their rate had been changed.
In light of the Financial Service Authority’s (FSA) findings a spokesman for Halifax said “in February 2011 we agreed a voluntary agreement with the FSA in relation to a customer contact and goodwill payment programme with specific Halifax customers”.
Some believe that these pay outs could be seen as a bank which has been caught and banged to rights for systematically draining money from its customers for 3 years.
Early this year Halifax let over half a million customers know that they might be entitled to compensation, however it seems the bank has now found that another quarter of a million customers might also be entitled to around £4,500 each.
On a typical mortgage of £150,000, a borrower could be due a repayment of approximately £4,500, therefore those who do benefit from this ‘mistake’ would and could be in an ideal situation to re-mortgage and move up the property ladder if they wished to.
Although on another note there is no doubt that there are families out there who would now still be in their homes and would not have been repossessed if the Halifax had from the start played fair over its rates.
Financial experts believe that this has been bad news for lending, especially when the mortgage and re-mortgage market needs people to have confidence in it.
Max Erskine from remortgagenow.co.uk said of the situation “lenders hopefully will be more careful in future and details of changes will be spelled out to borrowers in easy language. What we do not want is for people to be put off getting a mortgage or re-mortgage because of news like this”.
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