Nationwide and Skipton deny SVR cap payout need

Earlier this week LBG said it would refund £500m to around 300,000 customers who ended up paying more than expected for their mortgage after a promised 2% over base rate cap was removed in October 2008.

In January last year Skipton also removed the ceiling on its SVR, which promised borrowers their revert rate would not go over 3% above Bank of England base rate. The society raised it to 4.95% from 1st March 2010.

A spokeswoman for Skipton said: “What has happened with Lloyds is a matter for them and the regulator but our position remains the same. The ceiling on our SVR and our right to remove it in exceptional circumstances was clearly outlined in customers’ terms and conditions.”

Nationwide also said the move by LBG would not prompt any action from the mutual.

A spokesman said: “Our situation is completely different from Lloyds’. We kept our promise to have a 2% above base rate cap for borrowers taking out a mortgage before the 30th April 2009.

“The higher SVR of 3.99% only applies to mortgages taken after that date [including product transfers]. There has been no customer confusion at Nationwide and we are not in discussions with the FSA about this.”

LBG said its payout followed around 50 customer complaints about confusion caused by their mortgage offer letter rather than its terms and conditions.

An LBG spokeswoman said contractually the lender had explained that not all borrowers taking a mortgage between the 20th September 2004 and the 16th September 2007 would have the 2% above base rate cap on their SVR protected.

However, a summary of terms and conditions in the offer letter did have “potential to cause confusion” prompting the lender to agree with the FSA that customer refunds were appropriate.

Ray Boulger, senior technical director at John Charcol, said: “What Nationwide did is perfectly fair and has not worsened terms for existing customers. I would say if they do a product transfer in branch to a new Nationwide deal that they highlight the new SVR. Giving up a lifetime capped tracker (in effect what the original SVR is) is something the borrower really needs to consider carefully if switching to a 2-year fix.

“Skipton is more interesting because it depends how you define exceptional circumstances. The only time the guaranteed cap would be valuable to borrowers is in exceptional circumstances and that’s when Skipton would remove it. In effect the guarantee is pointless which I suppose is an argument to suggest that the Skipton terms could also have caused confusion for borrowers.”

The FSA said it would not comment on activity with individual firms.