Santander did not give clear information to borrowers affected by an increase in the cap margin linked to its standard variable rate (SVR) in 2008. The bank has now agreed to contact mortgage customers that were affected by the increase.
A SVR is the mortgage interest rate that many borrowers move to after an introductory deal on products like fixed-rate or tracker mortgages comes to an end.
A lender may restrict its SVR to a set figure above the Bank of England bank rate, which is often called a ‘SVR cap margin’.
Santander increased its SVR cap margin from 2.5% to 3.75% on 15 December 2008, so was able to charge customers with a mortgage linked to its SVR up to 3.75% above the Bank of England bank rate, which was 2% at the time.
We believe the letters Santander sent to borrowers in 2008 failed to clearly explain the SVR cap margin increase and what it would mean for them. Some customers did not even receive any notification about the SVR cap margin increase.
Therefore borrowers may not have understood their options, which for some customers may have included an opportunity to move their loan to a lender offering a lower rate or exit their mortgage without incurring an early repayment charge.
Santander will contact borrowers affected by the SVR cap margin increase in 2008, so you do not have to do anything at this stage.
The letters should arrive between 22 April 2013 and the end of autumn 2013 and will explain more about the SVR cap margin increase in 2008, what should have happened then and how Santander thinks you might have been affected by not receiving clear information about it. This is based on information the bank holds and assumptions it has made on what your options may have been at the time.
If you do not receive a letter from Santander by the end of autumn 2013 but believe you may have been affected by the SVR cap margin increase in 2008 you should contact the bank.
Some borrowers may want to complain to Santander where they think they suffered financial loss because the SVR cap margin increase in 2008 was not clearly explained.
While many people will be contacted by Santander it is likely that only a minority of these borrowers will have suffered financial loss and be entitled to compensation. This is because compensation largely depends on what you would have done if you had clear information, such as if you could have moved your loan to a lender offering a lower mortgage rate.
It will also depend on the circumstances of your case, including your outstanding mortgage balance, the value of the property and your financial situation at the time.
If you complain to Santander you may be asked to explain your individual circumstances in 2008 and why you think you suffered financial loss because the SVR cap margin increase was not clearly explained.
Santander has said it understands it could be difficult to provide evidence of what you might have done in 2008 and will not expect you to provide information produced then. However, if you have relevant information you can provide to Santander it would help the bank to consider your complaint.
Making a complaint to a firm is a free, simple process you can do yourself. If you are not satisfied with its response or you do not hear from it within eight weeks you can complain to the Financial Ombudsman Service (FOS). Find out more about how to complain.
Santander has set up a dedication phone line for discussing queries about the SVR cap margin increase in 2008. This number is included in the letters sent to customers affected by the increase.
You can also get more information from Santander.
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