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&#39Watchdog price ruling is threat to the market&#39

The financial ombudsman&#39s decision to end dual pricing by Halifax, Nationwide and Abbey National will destroy competition and product innovation in the mortgage market, warns analyst John Wriglesworth.

The Financial Ombudsman Service last week threw out appeals from Halifax and Nat-ionwide against its ruling to uphold complaints from individual customers that new borrowers were being given lower standard variable rates than existing borrowers.

Abbey also lost its initial case with the FOS but says it is considering appealing against the recommendation if its borrowers should be switched on the same grounds.

The move could affect up to one million borrowers alth-ough the ombudsman can only respond to individual complaints and cannot force len-ders to make changes across the board. But Halifax has removed the discount variable rate of 5 per cent and is putting all new customers on a single variable rate, currently 5.75 per cent.

The Building Societies&#39 Association has reacted angrily to the ruling and is consulting with lawyers as to whether lenders can challenge the ombudsman on human rights grounds.

BSA director-general Adrian Coles says the Ombudsman is not allowing adequate consultation time. He says there is no proper means to appeal as the only way to challenge a final decision such as for Halifax or Nationwide is through the courts.

Wriglesworth consultancy managing director John Wriglesworth says: “This is a travesty of justice and a shameful decision set to turn the clock back. Halifax and Nationwide were trying to make the market fairer and the Ombudsman has destroyed competition in favour of a few greedy customers who decided to go for it looking for a discount as well as a lower variable rate.”

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