Thousands of mortgage borrowers with Clydesdale Bank and its sister bank Yorkshire are facing additional monthly payments of as much as £200 after the lender miscalculated how much they needed to pay.
The blunder means 18,000 customers on variable rate mortgages have been underpaying their mortgage for the last 18 months and now have a shortfall on their loan.
The banks, both owned by National Australia Bank, said they had written to affected customers apologising for the error.
They blamed the mistake on a software error that originated in 2005 but was exacerbated from 2008 when the Bank of England started to cut interest rates sharply from 5 per cent to a historic low of 0.5 per cent.
Clydesdale and Yorkshire are asking customers to make higher monthly payments, plus an additional sum to make up for the shortfall.
A spokesman for Clydesdale said that while approximately half of the customers affected would face a small increase of less than £25 a month, up to 700 customers were set to see their monthly payments soar by more than £200 a month.
The banks have detailed the higher monthly payments in its letters to customers but said they will provide flexible repayment options if customers cannot cope with the larger sum. These include making a one-off payment to cover the shortfall or extending the mortgage term.
Mortgage brokers said affected customers should contact the banks if they are unhappy with the situation.
“I think customers are going to be feeling quite angry about it,” said David Hollingworth of London & Country, the mortgage broker. “They are imposing a payment that no one was expecting – a gesture of goodwill from Clydesdale and Yorkshire Banks may have gone a long way.”
Ray Boulger of John Charcol said the banks should offer compensation for their error. “The price of this mistake should be the banks paying the affected customers something, in the same way that customers are charged by banks if they exceed their overdraft limit,” he said.
Borrowers dissatisfied with the response from Clydesdale and Yorkshire and who feel that they are not being treated fairly have the option of lodging a complaint with the Financial Ombudsman Service.
Steve Reid, retail director for Clydesdale Bank, said the vast majority of the banks’ mortgage customers were not affected by the issue. “We would like to reassure mortgage customers that they need take no action unless they have received a letter from us.”
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