Halifax to pay £500m compensation over misleading mortgages

The Halifax is set to give 300,000 customers a "goodwill" payment averaging £1,600 after conceding that some of the mortgage interest rates may have confused consumers.

Halifax pays compensation over misleading mortgages
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A £500 million compensation pay-out was announced yesterday after city watchdogs and Lloyds Banking Group, which owns the Halifax, agreed a deal.

The move comes after customers were potentially misled by the brand's standard variable rate (SVR) mortgages. Homeowners who were sold the SVR mortgage between 2004 and 2007 believed the interest rate was capped at two per cent above the Bank of England base rate and that they would be made aware of any changes.

But late in 2008, the cap increased to three per cent and the majority of mortgage holders were not informed.

As a result, since January 2009, thousands of customers have been paying the higher rate without knowing and, on a mortgage of £100,000, that amounts to £2,166 extra.

The Halifax insisted that because the cap applied to one limited type of SVR mortgage, it was under no obligation to notify all the customers.

But Lloyds accepted that confusion was possible and struck a deal with the Financial Services Authority to offer a payment to those customers affected.

A Lloyds spokesman told the Daily Mail: "The potential confusion is that the mortgage offer letter sent to customers between 2004 and 2007 may have led certain customers to assume the cap applied... at any time they were on a standard variable rate.

"Some of them would have been unaware that the cap had changed from two per cent to three per cent."

It wasn't all good news however... the three per cent cap will remain in place.

What do you think? Were you affected by this misleading mortgage rate? Leave your comments below...