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Change from a fixed 8% interest rate to Bank of England base rate +1%
Following a consultation in the summer, the Financial Ombudsman Service (FOS) announced that the default interest rate applied to some awards it directs firms to make is being reduced from a fixed 8% revised to a variable rate linked to the Bank of England’s base (average) rate +1%. That change will come into effect and be applied to all new cases referred to FOS on and after 1 January 2026. Full details can be found at: Financial Ombudsman Service - Guidance on our interest awards - new interest from January 2026. The rate reduction is something that the BVRLA asked for in its consultation response.
Interest rate calculator
Some firms expressed an interest in developing their own calculators and FOS committed to publishing the calculation methodology that it expects firms to follow (which forms the basis of its own calculator). FOS has published guidance on this on its website.
Firms remain responsible for calculating the correct amount of compensation. However, to support firms, inform consumers and promote consistency of application in using the new default rate of interest, FOS is developing an interest calculator.
Users will be able to enter an amount and the period covered, and the calculator will show how much interest is payable under the new interest rate for that amount (and how that was worked out).
The calculator will go live on the FOS website on 2 January 2026 for firms, consumers and professional representatives to use.
Problems using the calculator once live should be reported to:
- email [email protected], or
- call 020 7964 1400.
FOS consultation on case fees
The FOS has also launched a consultation on case fees for 2026/27. This consultation sets out a proposal to:
• increase case fees from £650 to £680 (4.6% increase)
• increase case fee for professional representatives from £250 to £260 (4% increase), with the credit if the case is found in favour of the complainant increasing from £175 to £180.
Full consultation details are available at: Financial Ombudsman Service - Plans and Budget Consultation 2026-27. The consultation closes on 21 January 2026. Members can provide input into the BVRLA response, email [email protected] by Friday 9 January 2026. Members can respond to the consultation directly.
