Santander UK is to write to over 270,000 borrowers and invite them to complain after the lender failed to make it clear to customers about when it would increase the cap on its mortgage standard variable rate.
The FCA has agreed the deal with Santander after the regulator found that letters the lender sent to customers in 2008 ahead of increasing the SVR cap were unclear.
In December 2008 Santander increased its SVR cap from 2.5 per cent plus Bank of England base rate to 3.75 per cent plus base. The regulator says borrowers may not have understood what the increase meant for them, and their options, and says that some borrowers did not receive any letters at all.
Santander will start writing to affected borrowers next week, and will be contacting customers in batches until the autumn.
The FCA says only a minority of borrowers will be entitled to redress, which will depend on whether borrowers could have moved to a better mortgage rate.
Santander has since increased its SVR cap further to 4.99 per cent plus base. It informed customers of the move in August, while at the same time announcing plans to increase its SVR from 4.24 per cent to 4.74 per cent. The higher 4.74 per cent SVR came into effect in October.
A statement from Santander says: “Some customers who had an SVR-linked mortgage with an early repayment charge with Santander at the time we increased the cap margin may not have been aware that they could have repaid their mortgage ERC-free for three months after the increase affected their mortgage.
“Following receipt of our letter, if a customer contacts Santander we will record and review their case on an individual basis and, depending on the customer’s personal circumstances at the time the cap margin affected their mortgage, consider appropriate next steps.
“The majority of our mortgage customers would not have suffered any detriment as a result of any lack of clarity in the original communication in December 2008.”