Society facing legal threat over mortgage rates

Skipton announced in January it was increasing its standard variable rate (SVR), the rate customers revert to when their existing mortgage comes to an end, from 3.5 per cent to 4.95 per cent.

The group had pledged its SVR would never be more than three per cent above the Bank of England base rate, currently 0.5 per cent, except in "exceptional circumstances".

Leon Kaye Solicitors, based in London, is seeking an injunction, under the Unfair Terms in Consumer Contracts Regulations 1999, preventing the building society from continuing its monthly claims on borrowers for additional sums contrary to the "guarantee" that it gave.

It also wants it to pay back the additional sums it has received, which it claims is 8m per month, from 64,000 affected mortgage holders.

Jamie Berry, a partner at Leon Kaye Solicitors, said: "The OFT has a particular expertise with the consumer regulations that the Skipton have transgressed by its actions."

However, he said the OFT may chose to avoid taking action itself and pass the matter to the Financial Services Authority, despite the fact that the mortgages in question, buy-to-let and secured loans, are not regulated by the FSA.

The law firm has been approached by more than 100 borrowers.

Mr Berry said: "Leon Kaye would wish to seek compensation for as many affected mortgage holders as possible. We intend to fight this battle on as many fronts as we can for these borrowers and cannot rule out the possibility of a class action against Skipton if government and government agencies will not help."

He added: "Further and sustained action will ultimately attain justice in this case, but many more affected borrowers are needed to join us to engage collectively in the fight."

A Skipton spokewoman said: "As we have not received any direct communication from Leon Kaye regarding any formal complaint to the OFT, it would be inappropriate to comment."