UP TO 30,000 Abbey mortgage customers could be set for compensation after the lender failed to tell them they could switch provider penalty-free when it changed its standard variable rate (SVR).
Abbey owner Santander yesterday said it would be in touch with 270,000 borrowers to clarify its position over the SVR move The SVR is the rate that borrowers are shifted on to once their fixed rate term comes to an end.
The error occurred after the Bank of England cut interest rates in December 2008 by one percentage point. Abbey only passed on half the cut to borrowers, effectively increasing the “cap margin” between the SVR and the Bank base rate.
However, it failed sufficiently to clarify that those affected were free to move to another provider without triggering an early repayment charge, the Financial Conduct Authority (FCA) said yesterday.
Santander, the UK’s second biggest lender, will now write to customers who may not have been fully aware of the cap margin increase. The letters will explain why the cap margin was raised and how they were affected.
The Spanish-owned bank said only a minority of customers will have suffered any detriment due to the error. Compensation will depend on individual circumstances and whether borrowers could have moved to a better deal at the time, according to the FCA.
Santander, which is setting up a dedicated helpline for those affected, urged customers to contact it only once they have received the letter.