Thousands of Santander mortgage holders may be entitled to redress after the bank raised the cap on its standard variable rate (SVR) without clearly telling customers of the change.

The bank is to write to 270,000 customers about unclear information it gave before increasing the SVR cap from 2.50% to 3.75% in December 2008. Of this group, it has identified 30,000 most likely to qualify for compensation (see our free, printed Remortgage and Mortgage guides for home loan help).

The Financial Conduct Authority says Santander failed to give clear information to borrowers about the change. Others didn't receive a letter at all. The key problem is it was not made clear customers could leave penalty-free.

Those affected are Abbey customers whose mortgage is covered by the bank's 2002, 2004, February 2006 or December 2006 standard mortgage conditions. Santander bought Abbey in 2004.

The SVR is the interest rate mortgage borrowers move onto after an introductory deal comes to an end. The cap is the maximum the bank could raise rates above the base rate. So with a 0.5% base rate and a 3.75% cap, the maximum SVR is 4.25% (see our Cheap Mortgage Finding guide).

Am I due redress?

Of 270,000 customers affected, Santander says it has identified 30,000 who are most likely to be entitled to redress. They were all on a fixed-rate product which included an SVR lock-in period.

It may not have been made clear to these customers that there was a three-month period where they could repay their mortgage without having to pay an early repayment charge.

Without this information, some customers who could have moved to a better deal elsewhere may have stuck with Santander instead.

Normally, while on an SVR, there are no early repayment penalties, but in this case, customers were locked in.

However, any of the 270,000 who feel they may be owed redress can ask for their case to be looked into.

Santander says it hasn't put a figure on what affected customers may get in redress, as this will depend on individual circumstances.

What happens next?

The banking giant will send letters in batches to all affected borrowers from 22 April until autumn.

These will explain what happened in 2008, and outline what should have happened.

They will also give the information customers will need to ask for their cases to be reviewed on a case-by-case basis. See the bank's Q&A for more information.

A Santander statement says: "Following receipt of our letter, if a customer contacts Santander we will record and review their case on an individual basis and, depending on the customer's personal circumstances at the time the cap margin affected their mortgage, consider appropriate next steps.

"The majority of our mortgage customers would not have suffered any detriment as a result of any lack of clarity in the original communication."

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