FCA supervision director Clive Adamson has written to banks and building societies outlining their responsibilities ahead of any variation to their standard variable rates or other contract terms.

He said: “A number of mortgage lenders have engaged with us recently about changing their mortgage contracts, particularly on Standard Variable Rates (SVRs).

“We are writing to clarify our position on how you should engage with us if you want to change your SVR and remind you of the relevant regulations and rules that apply.”

Mortgage lenders do not need to notify the FCA before changing their SVRs, he said, but they must be able to show they have complied with regulation.

Lenders who take this step could find they are in breach of the Unfair Terms of Consumer Contracts Regulations 1999 or incompatible with the FCA Principles for Businesses, he said.

Adamson also reminded lenders of the regulator’s plans to consult on fairness in the context of changes to mortgage contracts.

In May, the Bank of Ireland hiked rates on tens of thousands of tracker mortgages. Four months later, the West Bromwich Building Society announced plans to increase rates on 6,700 tracker mortgages by two percentage points this December.

The Law Department principal Justin Selig, who is acting for landlords affected by the Bank of Ireland and West Brom rate rises, said the regulator had previously described the Bank of Ireland rate rise as a one-off.

He said: “It obviously isn’t a one-off. Look what happened with West Brom.” He said if the landlords take on the lenders and win, their victory could prevent further rate rises of this kind:

“One of the things we are worried about is other lenders trying to use the small print to try to get themselves out of a tricky situation. We are trying to resist that as much as we can.”

While the FCA appeared to accept the lenders’ decisions, in October FCA mortgage and consumer lending director Linda Woodall stressed they should not set a precedent for other lenders. “We recognise that there is an issue to be debated in the industry about customers’ expectations and changing of terms and conditions, even if correct,” she said.