You are here: Home - News -

Lenders may face compensation claims after FO rules on dual rates

by:
  • 15/02/2002
  • 0
Borrowers who were trapped in redemption tie-ins when lenders began introducing reduced standard va...

Borrowers who were trapped in redemption tie-ins when lenders began introducing reduced standard variable rates (SVR) for new customers last spring could get compensation.

Following a breakthrough ruling by the Financial Ombudsman (FO), Halifax has been forced to scrap its variable rate for new borrowers ‘ currently 5% ‘ in favour of its 5.75% variable rate in place for existing customers.

The ruling follows a case involving Mr and Mrs Wright, who were tied to a capped rate deal when the lender’s new rate was introduced. The customers claimed they were entitled to move to the lower rate despite being tied into the deal. Halifax has been forced to pay compensation.

Other lenders, including Nationwide, also introduced dual rates last year. Consequently Nationwide has also been subject to a ruling by the FO on its ‘fair mortgage strategy’ ‘ where a new mortgage base rate was introduced for borrowers ‘ but details of the case cannot currently be disclosed.

The FO said the latest ruling might pave the way for more compensation cases.

Iris Baker spokesperson for the FO, said: ‘The outcome of the Halifax case applies only to that complainant, but it may open the door for similar cases to be investigated.’

Halifax criticised the FO’s ruling. Mark Hemmingway, spokesperson for Halifax, said: ‘We do not agree with the Financial Omubudsman’s decision, as it makes it harder to pass on better rates to customers. The real beneficiaries are the lenders that have not reduced their rates.’

Nationwide said it was disappointed with the FO’s ruling on its own case, but did not expect a flood of new compensation claims.

Jackie Lawrence, spokes-person for Nationwide, said: ‘We cannot comment on our ruling by the FO as the borrower concerned has not gone public. We will make our position clear to borrowers concerning this ruling at the end of February.’


Tags

There are 0 Comment(s)

You may also be interested in

Business Skills

In this section, we offer short ‘how to’ guides on harder to crack areas of business. From social media, to regulation or niche product areas, we cover it all.

Profiles

Our journalists interview key industry entrepreneurs, strategists and commentators for day-to-day market insight and a strategic view of where the industry is heading. We offer lessons for success and explore the opportunities for your business

Success in Practice

Here, we share case studies fleshing out best practice to help you decide what could work for your business. Take a look at how others approached complex tasks like launching a new mortgage lender, advising on a new product area or deciding to specialise in another. Learn from others mistakes and triumphs.

Marketwatch

Each week, we ask top mortgage and property commentators with a unique perspective to examine a key news headline, market move or regulatory or political issue.

Poll

Vote in our weekly poll here. It’s your chance to tell us what you think and be heard on the top news stories of the week. Review our archive to find out what your industry really thinks and all our coverage of the results.

Top Comments

Be part of the conversation on Mortgage Solutions. We want to hear from you. We have a tool called Disqus to tell us which stories get the most comments each week. Every Friday, the team picks the most thoughtful or opinionated contributions from our readers to enjoy again. Don’t forget to share your favourite stories from the site on social media to keep the conversation going.
Read previous post:
LMS launches new service to help clients buy abroad

Legal Marketing Services (LMS) has launched a European mortgage service intended to make the process...

Close