Manchester-based law firm Quanta Law challenged the review, saying that full transparency in a mortgage term was key to assessing a case properly.
The lender has agreed to both the FOS’ and Quanta Law’s costs.
The legal firm says that the decision is a “step towards justice” and could help thousands who had been mis-sold a mortgage.
Earlier this year, the High Court dismissed the Co-operative Bank’s attempt to prevent the FOS from looking into historic interest rate rises beyond the statutory timeframe.
Interest rate decision scrutiny
Jonny White, CEO of Quanta Law, explained that when the Bank of England cut interest rates after the global financial crisis, some lenders did not reduce their SVR for mortgage holders by a “corresponding amount”.
“That move, against a backdrop of increases when the base rate jumped, was unfair and, some might say, designed by lenders to shore up their profits and protect themselves from the massive drop in people taking out new mortgages,” he added.
White said that it was “vital” that the FOS is able to closely scrutinise the interest rate decisions taken by lenders, which he added was subject to fairness tests under EU consumer law that was in place at the time.
“There are hundreds of thousands of homeowners currently paying more than they should have done for their mortgage. What’s even more worrying is that many of these are mortgage prisoners who have been prevented by lenders from switching provider, so will be stuck on punitively high interest payments with no means of switching their mortgage to another lender,” he noted.
He said that it was crucial as a firm for them to have “all the necessary information at our disposal” to seek redress for its clients.
“If lenders feel as though they’ve acted morally, then there should be no need to suppress important information at all.”
More encouraged to come forward
White said that the recent decision would hopefully encourage those that have been mis-sold mortgages to come forward.
He explained: “Mortgage overcharge cases often take several months before a client sees any redress, and the continued delays are causing untold harm to the financially vulnerable who are paying the costs of this every month.
“Our main priority is to help those who’ve been financially impacted as a result of mis-selling. We hope these outcomes will encourage lenders to think about their processes long term.”
He said that it was eagerly waiting for the FOS’ decisions, especially in circumstances regarding amending the mortgage balance to reflect a fair interest rate, adding that it could “go a long way to help clients manage the cost of living crisis”.
Active lenders must treat customers fairly
Rachel Neale, lead campaigner at UK Mortgage Prisoners, said that it had been aware for a long time that mortgages prisoners were not held exclusively on closed books with inactive lenders.
She continued: “Active high street lenders must treat their customers fairly and we very much welcome this decision and hope it will help those who have been held on high SVRs during a decade or more of historic lows.
“Lenders have profiteered from vulnerable customers and this is another example of a successful challenge. We hope all borrowers who have been trapped historically and suffered detriment will be recompensed and that this will extend to the inactive administrators also.”
She added that law firm Harcus Parker, who brought a £800m legal claim against TSB and its subsidiary Whistletree earlier this year, would also be interested in the outcome.
A Santander spokesperson said the firm did not have comment at this time.
