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Halifax to pay £500m to mortgage customers | Halifax to pay £500m to mortgage customers |
(about 2 hours later) | |
The Halifax will make payments to 300,000 mortgage customers, up to a £500m total, after reaching a deal with the Financial Services Authority (FSA). | The Halifax will make payments to 300,000 mortgage customers, up to a £500m total, after reaching a deal with the Financial Services Authority (FSA). |
The bank, now part of Lloyds Banking Group, admitted confusing customers about its right to charge them more for their standard variable rate mortgages. | The bank, now part of Lloyds Banking Group, admitted confusing customers about its right to charge them more for their standard variable rate mortgages. |
The Halifax raised the margin on some of these mortgages from 2% to 3% above base rate in January 2009. | The Halifax raised the margin on some of these mortgages from 2% to 3% above base rate in January 2009. |
Lloyds said its agreement had been a "voluntary" and "proactive" one. | Lloyds said its agreement had been a "voluntary" and "proactive" one. |
"The group is committed to running its business with the highest levels of integrity and treating its customers fairly, and therefore believes that a proactive co-ordinated programme to identify affected customers and make goodwill payments is the appropriate course of action," Lloyds said. | "The group is committed to running its business with the highest levels of integrity and treating its customers fairly, and therefore believes that a proactive co-ordinated programme to identify affected customers and make goodwill payments is the appropriate course of action," Lloyds said. |
Halifax said that some customers would receive a flat-rate payment of £250. | Halifax said that some customers would receive a flat-rate payment of £250. |
Others will receive a variable payment, related to the rise in their interest payment and the size of their mortgages. This could range from hundreds of pounds to several thousand pounds. | Others will receive a variable payment, related to the rise in their interest payment and the size of their mortgages. This could range from hundreds of pounds to several thousand pounds. |
'Surprised' | 'Surprised' |
The problem arose in the autumn of 2008 and early 2009 as the Bank of England progressively cut its official bank rate from 5% to 0.5% to help stave off the effects of the banking crisis. | The problem arose in the autumn of 2008 and early 2009 as the Bank of England progressively cut its official bank rate from 5% to 0.5% to help stave off the effects of the banking crisis. |
The Halifax was capping the standard variable rate (SVR) to customers who were also being locked into the mortgages through early repayment charges. | |
Halifax mortgage offers issued between September 2004 and September 2007 had not been as clear as they could have been and had the "potential to cause confusion". | |
The firm not made clear that the lender's terms and conditions meant it could later vary the charge for customers who went onto its standard variable rate (SVR). | |
The problem was first highlighted at the time by Ray Boulger of mortgage brokers John Charcol. | The problem was first highlighted at the time by Ray Boulger of mortgage brokers John Charcol. |
He had queried whether or not the Halifax had the right to change its SVR from a 2% margin over base rate to a 3% margin if the offer documentation, stating the key facts of the deal, had not explicitly mentioned the bank's right to do so. | He had queried whether or not the Halifax had the right to change its SVR from a 2% margin over base rate to a 3% margin if the offer documentation, stating the key facts of the deal, had not explicitly mentioned the bank's right to do so. |
"The issue was whether the terms under which the Halifax could vary the rate cap had been met," he told the BBC. | "The issue was whether the terms under which the Halifax could vary the rate cap had been met," he told the BBC. |
"I am surprised it has taken to so long to sort out." | "I am surprised it has taken to so long to sort out." |
Few complaints | Few complaints |
Typically the affected customers were those whose mortgage deals reverted to the Halifax SVR once their fixed-term or tracker rate deal had expired. | Typically the affected customers were those whose mortgage deals reverted to the Halifax SVR once their fixed-term or tracker rate deal had expired. |
The Halifax raised the ceiling on its SVR from bank rate plus 2% to bank rate plus 3% with effect from January 2009, citing "extenuating economic conditions". | The Halifax raised the ceiling on its SVR from bank rate plus 2% to bank rate plus 3% with effect from January 2009, citing "extenuating economic conditions". |
This meant that some 300,000 customers at this point were charged more than would otherwise have been the case. | This meant that some 300,000 customers at this point were charged more than would otherwise have been the case. |
"We have had very few complaints - in the tens, fewer then 50," said a Halifax spokesman. | "We have had very few complaints - in the tens, fewer then 50," said a Halifax spokesman. |
"It has been a very complex area, involving digging out lots of historical mortgage documentation," he added. | "It has been a very complex area, involving digging out lots of historical mortgage documentation," he added. |
About 600,000 customers will be contacted by the Halifax, however, about 300,000 customers will not receive a payment as they were not paying the SVR on their mortgage during the period affected. | About 600,000 customers will be contacted by the Halifax, however, about 300,000 customers will not receive a payment as they were not paying the SVR on their mortgage during the period affected. |
Those who were affected and who are still with the Halifax will have their mortgage accounts credited in April this year. | Those who were affected and who are still with the Halifax will have their mortgage accounts credited in April this year. |
If they have left the Halifax they will be traced and offered a cheque. | If they have left the Halifax they will be traced and offered a cheque. |