Bank Error Leaves Thousands Facing Increased Mortgage Payments

A calculation error by one of the UK’s largest banks has resulted in thousands of mortgage customers facing increased mortgage repayments.

Around 18,000 mortgage customers of the Clydesdale and Yorkshire Banks have been contacted about errors in the way their mortgage payments were calculated following last year’s unprecedented interest rate reductions.

It is understood that customers are facing hikes of anything from £25 to hundreds of pounds per month as a result of the bank’s mistake.

Clydesdale and Yorkshire Bank are both owned by National Australia Bank, one of the world’s leading financial institutions. The problems appear to have arisen from a failure to correctly calculate capital repayments following the harsh cuts to interest rates in 2009. The Bank of England Base rate has stood at 0.5 per cent since March last year.

By wrongly calculating the payments, the banks have been collecting less than the minimum monthly payment needed for borrowers to pay their mortgage within the agreed term. Customers are therefore facing increased payments to make up this shortfall.

A Clydesdale Bank spokesperson said: "First and foremost we are very sorry that this error has happened."

The banks have written to the customers affected by their error with suggestions of how they can bring their mortgage account up to date. The most likely course of action is for customers to increase the amount of their monthly payment. Clydesdale claimed that around half of the customers who have been affected by the error would see their repayments increase by less than £25 a month.

Steve Reid, retail director for Clydesdale Bank, said: "We would like to reassure mortgage customers that they need take no action unless they have received a letter from us.

"The vast majority of our customers are not affected".