Two-level rates 'unethical'

A HOME loans chief says it was "unethical" of banks to set different interest rates for new and old borrowers.

Mike Lazenby, chief executive of Kent Reliance Building Society, hit out at the Halifax after it was rapped by the financial services ombudsman for two-tier rates. The Halifax abandoned the practice after the ruling but faces compensation claims from borrowers restricted to old higher rates.

Mr Lazenby said his society also had two standard variable rates but applied them in a different way.

The Halifax had been selective about which borrowers it allowed to have the lower rate. It was mainly new customers and customers who "kicked up a fuss."

At present, Kent Reliance set a standard variable rate of 5.43% but automatically switched borrowers to a "loyalty" rate - currently 4.73% - after four years.

"It's the fairest way of doing it," he said. "We would not offer a new member something we wouldn't offer an existing member."

Halifax, now linked with the Bank of Scotland under the HBOS name, is the country's biggest lender.

Mr Lazenby, formerly with the Nationwide, which was also criticised by the ombudsman, claimed this had made the Halifax arrogant.

The whole system of two-tier charging across the industry was "morally bankrupt," he said.

Meanwhile, members have complained that the word "Kent" in the society's new corporate design is too small.

Mr Lazenby said he accepted the criticism and would increase the size of the typeface.

He denied that it was part of a campaign to remove the word Kent altogether from the society's name.

A few months ago, he admitted that the society had considered dropping "Kent."

But the county was still the society's main focus and he wanted Kent Reliance to become the natural choice for savers and borrowers living in Kent and Medway.

Forty-five members - a record turnout - attended the society's first annual meeting to be held in the society's new headquarters at Sun Pier, Chatham.

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