Lloyds Banking Group, Britain’s largest mortgage lender, has been forced to put aside £500m to compensate customers who took out home loans during the boom years.
The £500m compensation will be given to 300,000 Halifax customers as “goodwill payments” from Lloyds Bank. This compensation is part of a deal struck between the bank and Financial Services Authority over confusing language used in documentation on mortgages agreed between September 2004 and September 2007.
Halifax, which became part of the Lloyds Banking Group after its takeover of HBOS in 2008, failed to inform customers who took out mortgages during the 2004 to 2007 period that it had raised its original standard variable rate (SVR) cap from 2pc above the Bank of England base rate to 3pc above in October 2008.
Next month, it is thought that Halifax will start contacting the affected borrowers to make them “fully aware” of the confusion surrounding the rate cap, which was brought in at the height of the financial crisis.
Halifax will also write to 600,000 mortgage borrowers to apologise for the confusion over whether the SVR cap applied to them, which led to some customers missing out on a lower mortgage payment opportunity.
Lloyds has set aside £500m for affected customers, working on an average payment of £1,667 per person. On top of this, those who suffered no financial loss will still receive a flat payout of £250.