Mortgage miscalculation means borrowers must pay shortfall

Financial News

An estimated 18,000 thousand mortgage holders will have to increase their monthly repayments after a miscalculation made by Yorkshire and Clydesdale bank.

Half of those affected will pay an extra £25 a month to keep up with their variable rate mortgages. But up to 700 people will have to pay a substantial sum of £200 each month on top of their usual repayments.

A mathematical mistake built into the bank’s mortgage systems in 2005 was cited as the reason for the error – when interest rates fall or rise sharply the problem becomes more apparent.

The payment miscalculation worsened after the Bank of England interest rates fell to a historic low of 0.5 per cent in 2008. The reduction had caused the monthly repayments of borrowers to drop considerably and the miscalculation meant customers were not paying the sufficient amount required to fulfil the terms of their mortgage agreements.

Retail director for Clydesdale Bank Steve Reid said: “First and foremost we are very sorry that this error has happened and for any inconvenience it may have caused those customers affected. We would like to reassure mortgage customers that they need take no action unless they have received a letter from us”.

He continued: “The vast majority of our customers are not affected and, of those that are, 99 per cent have already received their letter advising them of the specific impact on their account. The other 1 per cent will hear from us in the next couple of weeks advising them of options to bring their account back on track”.

Ray Boulger of mortgage brokerage firm John Charcol said: “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”.

The bank said it will allow flexible repayment options and explained that customers can make one-off payments to clear the shortfall if they wish.