300,000 Halifax mortgage customers are to receive compensation.
Halifax mortgage customers who were given "confusing" information about a cap in interest costs will receive £500 million in compensation.
The Government backed bank has admitted that it failed to clearly state its standard variable rate would not fall by as much as customers expected during the Bank of England base rate slump in early 2009.
Around 300,000 borrowers are set to receive compensation after an agreement was reached between the bank's parent company, Lloyds Banking Group and the Financial Services Authority.
Halifax mortgage customers who were sent a mortgage offer between 20 September 2004 and 16 September 2007 and, who still held that same mortgage in January 2009 are in line for a compensation payment.
Around 600,000 customers will be contacted, however approximately 300,000 will not receive a payment as they were not on the lender's SVR during the period affected.
Halifax had promised that its SVR would never be more than 2 per cent above the base rate however, this cap was removed from its terms and conditions in September 2007. The problem arose in autumn 2008 as the Bank of England progressively cut its bank rate from 5 per cent to 0.5 per cent.
The Halifax decided not to cut its SVR in line with the BOE, which increased its margin above the base rate.
The bank says its agreement to pay compensation to Halifax mortgage customers has been "voluntary" and "proactive" and, advises that it is committed to running its business with the highest level of integrity and treating its customers fairly.
