Abbey National faces payouts totalling up to £10m to 20,000 customers after the Financial Ombudsman upheld a complaint over mortgage pricing.
The ruling against Abbey's “dual-pricing” policy follows a customer complaint that a cashback mortgage deal remained linked to the standard variable rate of 7 per cent despite offering its cheaper Classic base rate tracker mortgage, running at 0.9 per cent above Bank of England base of 5.5 per cent at the time.
Abbey says it is disappointed as it does not believe it has operated a dual-pricing policy but it will accept the decision.
It withdrew the Classic base rate tracker last week following the decision.
It is contacting other customers who have complained and says, in eligible cases, which it estimates will be less than 1 per cent of its two million borrowers, it will refund interest from the date the customer first made contact.
The ombudsman has made similar rulings against Nationwide, Halifax, Cheltenham & Gloucester and HSBC.
Abbey spokeswoman Christina Mills says: “Ultimately, this whole thing is not great for the customer. It reduces choice in the market and, taken to the nth degree, everyone could end up with the one product. This is a retrograde step.”
Broker club Mortgage Intelligence managing director Sally Laker says: “I think that all the lenders in this situation, not just Abbey, did not make their policy abundantly clear to people. I think they will all have to do the right thing like Nationwide and make a payout to clear the record.”