Both Halifax and Nationwide are to compensate borrowers who were stuck on a higher standard variable rate (SVR) when a lower rate for new borrowers was introduced last spring.
The announcements follow investigations by the Financial Ombudsman into dual pricing, after borrowers who were tied into special deals complained they were being treated unfairly as they could not move onto the lower rate.
Halifax announced last month that it would be scrapping its lower rate, meaning all customers are now priced on its higher SVR. The lender has now announced it will be writing to 10,000 borrowers who will be refunded, on average, £500, including £150 for any inconvenience suffered. However, the refund will only apply to borrowers on a capped or discounted mortgage who asked to be transferred to the lower rate between 1 March 2001 and 31 January 2002.
Nationwide, on the other hand, said it will bring all customers in line with its lower base mortgage rate (BMR), scrapping its old, higher SVR. In addition, Nationwide will automatically reimburse all borrowers who have been stuck to the higher SVR, by a reduction in their mortgage balance. The reimbursement will be based on the 0.5% difference between interest charged at the SVR and interest charged at the BMR between 1 March 2001 and 31 March 2002.
Philip Williamson, Nationwide’s chief executive, said other lenders should follow its lead and automatically reimburse all affected borrowers.
‘Unlike some of our competitors, we do not believe it is right to force borrowers in a similar position to go to the Ombuds-man. It was already our stated intention to move all our existing borrowers onto our base mortgage rate. It makes sense to bring forward this plan and ensure all our borrowers are treated as though they have had the base mortgage rate from day one,’ he said.