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One of Royal Bank of Scotland's mortgage divisions has come under fire after refusing to pass on last month's interest rate cut in full, despite having "promised" to follow Bank of England base rate moves.
The decision has prompted an outcry among customers.
Holders of mortgages in the One account, formerly a joint venture with Sir Richard Branson's Virgin empire but now 100% owned by RBS, are worried they will also not see the full benefit of today's likely rate cut. Dozens of people have joined a Facebook protest group including Rowan Gormley, the former boss of Virgin Direct who developed the One account concept.
RBS and NatWest last month said standard variable rate (SVR) mortgages would be cut by the "full 1.5%" after the Bank of England base rate was cut from 4.5% to 3% on November 6. But One account customers have been told they are only getting a one percentage point cut.
Angry customers point out the gap between the base rate and One account rate has increased by a percentage point in the past year. Against a backdrop of falling interest rates, they were hit with a quarter-point rise in July. The Guardian has obtained a copy of a letter sent out by the division in May 2001, which states: "Our promise is that we'll follow the base rate and pass the benefits of interest rate cuts on to our customers straightaway."
Tony Wood, the former marketing director of Virgin Direct who is a One account customer, said RBS's behaviour was "a betrayal of all the principles we built the One account on in the first place". He added: "It's interesting to see how, as a majority taxpayer-owned business, they can even contemplate going back on such clear-cut promises, which was one of the main reasons for customers signing up in the first place. It makes particularly interesting reading in the context of the Financial Services Authority's 'treating customers fairly' rules."
Dozens of disgruntled mortgage holders have joined the Facebook group, said Wood, who now works as a brand and communications consultant.
RBS's decision to treat One account customers differently is potentially embarrassing because, when the division was half-owned by Virgin it made great play of how it passed on every rate cut to customers in full within 24 hours of each Bank of England announcement. In 1999, the then managing director of Virgin One, as it was called, said: "We have passed on every rate cut in full on the same day because that is how our customers expect to be treated - fairly and honestly."
RBS, which bought out Branson's stake in 2001, said: "The One account mortgage is a variable rate product and not linked to base rate or the RBS and NatWest SVR. The decision to cut flexible rates by one percentage point follows consideration of a range of factors such as the wider market environment, including the sustained increase in the cost of funding variable rate mortgages."
A spokeswoman said One account holders had benefited from a half-point cut effective last month. "The cumulative effect means this mortgage remains competitive. This movement is in line with the product terms and conditions," she said.
- Royal Bank of Scotland
- Mortgages
- Borrowing & debt
- UK banking sector
- Consumer affairs
- First-time buyers
- Credit crunch
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