The big Halifax hush-up

Thousands of borrowers may be missing out on compensation from the Halifax over its 'dual mortgage rate' debacle because they do not know the bank is paying some claimants.

They still have a chance, however, to reclaim the extra interest they were charged when Britain's biggest mortgage lender offered a new mortgage rate to new and existing customers.

The Halifax has been quietly compensating borrowers who prove they read something that led them to conclude they would be refused a chance to be transferred to the new, lower variable rate introduced by the bank last year.

Mark Hemmingway, a Halifax spokesman, confirmed it has refunded interest and paid compensation to 'a tiny' number of people on this basis.

Yet thousands more borrowers may be entitled to money, but are not aware that they qualify.

In cases like this, where a company is making ex gratia payments, recipients are often asked to sign confidentiality agreements.

Hemmingway stressed: 'Each case is dealt with individually but it is not our normal policy to do this.'

He added: 'Customers have to clearly demonstrate to us that, before the dual rate was removed at the beginning of February - for example by providing samples of our marketing literature which was available at the time - they were aware of the dual mortgage issue, but had decided not to apply because they believed they would be declined.'

The lower rate was introduced in March 2001 for 'loyal' Halifax customers as a cheaper alternative to the Halifax's standard variable rate. Discounted and capped rates continued to be linked to the higher standard variable rate.

Existing borrowers had to apply to transfer to the cheaper rate, and those that were tied into discounted or capped rate mortgages were expected to pay any relevant early redemption penalties if they wanted to make the switch.

The lower rate was withdrawn on 31 January this year following an initial decision by the Financial Ombudsman to uphold a complaint from a capped rate borrower whose request to transfer had been rejected unless he paid the early redemption penalties.

The bank agreed to refund the extra interest and pay £150 compensation to 10,000 borrowers whose requests to transfer to the lower rate were rejected.

In some cases the combined package has amounted to thousands of pounds. The bank has also paid £100 - but no interest - to those who complained during February, before the ombudsman's full ruling was published.

Thousands more homebuyers were left out of pocket, either because they complained after February or didn't do so at all.

David Cresswell, a spokesman for the Financial Ombudsman's Office, says that although the rulings were based on six 'lead' cases selected from many more, none was from a customer who had previously been deterred from making a protest.

'The Halifax has obviously made its own interpretation of how to apply our decisions on similar but not identical cases,' Cresswell said.

Four other lenders - the Nationwide, Abbey National, Cheltenham & Gloucester and HSBC - introduced and then withdrew dual rates after upsetting customers.

Only the Nationwide, however, compensated all borrowers, regardless of whether they had complained or not. It paid out £90 million by reducing the size of borrowers' mortgages.

The Halifax has paid only £12m. Abbey National, Cheltenham & Gloucester and HSBC have not revealed the amounts they paid.

The ombudsman has received more than 5,000 complaints about the five lenders. Cresswell said that although many have not qualified for compensation, they have become more questioning about the rates they are paying and more careful about the products they buy.