Halifax could face a compensation bill running into millions of pounds after the Financial Ombudsman Service ruled it mistreated borrowers by only allowing new customers access to its lowest interest rate.
In a ruling which could open the floodgates to similar claims from more than 500,000 customers, an FOS adjudicator awarded compensation to an existing Halifax borrower banned from switching to the lower variable rate introduced in March.
The move could pave the way for compensation claims from disgruntled borrowers at Nationwide, Abbey National and HSBC which have all introduced low-cost schemes for new customers.
The ruling comes after the borrower complained to the FOS that Halifax blocked him from switching to its new rate because he was tied to a capped deal based on its higher variable rate.
The ombudsman sided with the borrower on the grounds that his mortgage contract did not specify which rate he should pay.
An FOS spokeswoman says: “Although we cannot discuss individual cases, for future complainants in similar circumstances we would come up with the same decision. It would be ludicrous not to.”
A Halifax spokesman says: “We vigorously disagree with the decision because we believe what we are doing is right and in the best interests of our customers. We will continue to pursue the strategy.”