Mortgage customers may face repayment hikesYorkshire & Clydesdale mistake may prove costly

22 July 2010

Yorkshire Bank

18,000 homeowners who have variable rate or tracker mortgages with Yorkshire and Clydesdale banks may face significant increases in their mortgage payments, thanks to a miscalculation.

The mistake, which relates to the calculation of capital mortgage repayments, was originally made in 2005. However, the rapid drop in the Bank of England base rate seen in 2009 has compounded the error, which was noticed during a recent routine review of Yorkshire and Clydesdale mortgages.

In total, £19m has been underpaid on variable rate and tracker mortgages offered by Yorkshire and Clydesdale banks as a result of their mistake, with customers now expected to make up the shortfall. 

This means some people may now be hit with mortgage repayment hikes of anything between £25 per month and hundreds of pounds per month.

Mortgage rate mistake

Yorkshire and Clydesdale’s fixed rate mortgage customers are not affected by the error, and in a statement the banks say most customers whose mortgage payments have been wrongly calculated will already have been informed by post.

Therefore, if you have not received a letter alerting you to this problem, it is unlikely you’ll need to pay any extra on your mortgage.

Nevertheless, some people are likely to be left in financial difficulty as a result of the mistake – particularly those on tight budgets who cannot afford to increase their mortgage repayments to the level suggested by Yorkshire and Clydesdale’s letters.

In this situation, it’s important to discuss your situation with the relevant bank and try to arrive at a solution that is both fair and reasonable. One option might be to extend the term of your mortgage, while some Yorkshire and Clydesdale customers may be able to make one-off payments to cover the shortfalls they have unwittingly built up.

Yorkshire and Clydesdale mortgage customer complaints

Commenting on the mortgage mistake, Steve Reid, retail director for Clydesdale and Yorkshire banks, said: ‘First and foremost we are very sorry that this error has happened and for any inconvenience it may have caused those customers affected.’

The banks’ media statement says: ‘[We] are now focused on working with each customer to remedy the situation in the most appropriate way for their individual circumstances.’

However, Which? chief executive Peter Vicary-Smith says: ‘It's unacceptable that customers who have been paying off their mortgages in good faith suddenly find they are behind in their repayments. For most people, their mortgage is their biggest financial commitment so this could have a huge effect on their finances.

‘Clydesdale and Yorkshire must treat all of their affected customers fairly and ensure that no customer finds themselves in financial difficulty due to this error. Any customer that feels they are being treated unfairly should complain to the Financial Ombudsman Service.’

For help with complaining about these types of issues, read the Which? How to complain about financial services advice guide.

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