Brokers and MPs say the fact Santander UK is having to contact more than 270,000 mortgage customers after it failed to clearly explain an increase in its standard variable rate cap shows borrowers are having “the rug pulled from under them”.
Santander says 30,000 borrowers could be paid redress after it increased its SVR cap in December 2008, from 2.5 per cent plus Bank of England base rate to 3.75 per cent plus base.
Santander is inviting borrowers to complain after the Financial Conduct Authority found the lender failed to explain to borrowers they had a three-month window to repay their mortgage or move to another lender without incurring an early repayment charge. In some cases it failed to write to borrowers at all.
The bank upped its SVR cap again in October to 4.99 per cent plus base, and raised the SVR from 4.24 to 4.74 per cent.
John Charcol senior technical manager Ray Boulger believes the number of affected borrowers could be higher than 30,000.
He says: “What is the point of having an SVR cap when it can be changed relatively easily by the lender? It seems to raise a bigger question about whether caps are genuine, as at the very time when the cap is worth anything to the consumer the rug is pulled from under them.”
Labour MP and Treasury select committee member George Mudie says: “It is unfortunate banks are seeking to repair their balance sheets at the expense of mortgagees.”
Santander has set aside £232m to deal with “customer conduct issues”, partly to cover SVR redress. Halifax carried out a similar review in February 2011.