The Week Unzipped: New borrowers hit as lenders impose different rates and remove ceiling

LLOYDS TSB and Cheltenham & Gloucester have become the latest lenders to stop borrowers moving on to a bargain basement standard variable rate (SVR) when their special deal comes to an end, by launching a new rate for new customers.

Along with Nationwide Building Society, it will now offer dual mortgage rates, even though these were notionally outlawed by the Financial Ombudsman in 2002.

Lloyds, C&G and Nationwide say the circumstances surrounding their new pricing policy is different from that which caused a row with customers.

At present Lloyds customers are guaranteed that when their special deal comes to an end, the SVR they revert to will never be more than 2 per cent above bank rate, which currently gives them a bargain at 2.5 per cent.

From 1 June new borrowers who subsequently switch deals will revert to a different SVR with no ceiling and no longer linked explicitly to bank rate. For the time being, this new SVR is 3.99 per cent.

Lenders with caps on their SVR, such as Lloyds, Nationwide and the Skipton, have struggled because low base rates made the loans unprofitable.

Skipton had a clause in its mortgage contracts allowing it to ditch the standard rate restriction in exceptional circumstances, which it did at the beginning of this year. Skipton's SVR for all borrowers is now 4.95 per cent.

Nationwide, like Lloyds and Cheltenham & Gloucester, had no such get-out clause. It now charges existing customers 2.5 per cent and new customers 3.99 per cent.

This is the first time since differential mortgage rates were banned by the Financial Ombudsman in 2002 that lenders have charged different customers different standard rates.

However, lenders have defended their action saying new borrowers will be made fully aware they will not have access to the lower SVR. The last row broke out because lenders introduced a lower SVR for new borrowers that existing customers could not take advantage of.

Lending down

Lending to homebuyers in Scotland fell 33 per cent in the first three months of 2010, according to the Council of Mortgage Lenders. The decline mirrors lending across the rest of the UK.

The amount borrowed for house purchases fell to 1.1 billion from 1.6bn in the last three months of 2009. This is largely due to homeowners taking advantage of the stamp duty holiday before it ended in December last year.

First-time buyers account for 40 per cent of all house purchases since January, putting down an average 23 per cent deposit. This is the first time average deposits for this group have been below 25 per cent since the end of 2008, suggesting some modest easing of affordability criteria for Scottish first-time buyers.

Time to complain

The Financial Services Authority has introduced a temporary rule to give customers with complaints relating to the purchase of payment protection insurance (PPI) more time in which to refer their complaint to the Ombudsman.

The action suspends the existing six-month time limit for referring complaints. The FSA hopes the move will ensure recent PPI complainants are not disadvantaged by running out of time to refer their complaint while the regulator works towards a long-term solution to problems with mis-selling of PPI policies.

A spokesman for the consumer lobby group, Which?, urged anyone with a legitimate claim to complain. Vera Cottrell said: "Of the two million people we reckon have been mis-sold PPI, only a minority ever complain. It's outrageous that so many consumers are still waiting for fair redress, and we hope that this decision encourages more of them to persist."