30,000 Santander mortgage holders in line for compensation

The new financial regulator has told Santander to contact 270,000 customers about mortgage errors in 2008. And some of them could be in line for compensations

Santander has said 30,000 of its mortgage customers could be due compensation after a paperwork mistake made in 2008.

The borrowers, who held Abbey mortgages, were not given the correct infomation when put on the bank's standard variable rate (SVR) after the fixed-term period for their mortgage had ended.

It also failed to tell customers that they had the option of transferring the loan elsewhere and getting a cheaper deal.

Abbey mortgage errors

The problems started in 2008 when the Bank of England base rate was being cut. It went down by 1% but Santander only passed on a decrease of half a percentage point to its customers.

It also increased the ‘cap margin’ – the limit at which a provider can charge its customers above the base rate – to 3.75%, from 2.5%.

At the time the base rate was at 2% so this meant Santander could charge up to 5.75% for its SVR.

The problem is that the lender didn’t make it clear to customers that they had the option of leaving the company and finding a mortgage elsewhere.

Many people were unaware they could switch to a cheaper deal or pay the loan off early and end the mortgage.

The Financial Conduct Authority (FCA) has confirmed that Santander didn’t give clear enough information to customers and has told it to contact customers.

Customer compensation

Santander will be writing to 270,000 of its customers to explain exactly what happened in 2008 over the next few months.

Only customers who held an Abbey mortgage during December 2008 are likely to have been affected and information will be given to help people identify if they qualify for compensation and how to apply for this if they do.

It’s not clear exactly how much will be paid out to each person involved but cases will be dealt with on an individual basis.

The bank has asked that customers wait until they receive these letters before getting in contact, but it has set up a phone line to deal with problems about the issue and more information can be found on the Santander website.

Halifax was involved with a similar case in 2011 after mistakes it made in 2009. It failed to tell 600,000 of its customers that it had increased the SVR and had to set aside up to £500 million to compensate customers.

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