UK NEWS

SCANDAL OF MORTGAGE BLUNDER BY BANKS

Banks like Nationwide have come under attack for overcharging

Monday May 28,2007

By Marco Giannangeli

Comment Speech Bubble Have your say(1)

HOMEOWNERS charged thousands of pounds because of bank errors in the way their mortgage repayments are being calculated, it emerged yesterday.

The news is likely to infuriate thousands of struggling borrowers across Britain who have already hurdled inflated house prices and now face rising interest rates.

One farmer paid an extra £56,520 after two separate mistakes by Nationwide. Although most are one-off “human errors”, none of the mortgages reviewed by independent financial auditor Bankcheck were in favour of the borrower.

The burden is always on the borrower to find the error and challenge it.

The errors affect those people who have taken out repayment-style mortgages. Because some of the capital is paid back every month along with interest, these are more complicated to work out and customers are less likely to realise they are overcharged.

An audit of 30 mortgages uncovered mistakes by Nationwide, Alliance & Leicester and Abbey.

Other examples include a businessman who, in the 80s, was quoted 11.75 per cent for a £15,000 mortgage from Alliance & Leicester instead of the correct 11.25 per cent rate.

The bank agreed that the wrong figure had been keyed in, and offered to refund the £2,189 difference. And aerospace engineer Terry McDowell received a rude shock when his bank informed him it would be extending his 25-year mortgage by six years, and redoubled his repayment figure.

When Mr McDowell, of Ballycare, Northern Ireland, queried this, he found he had been undercharged by £19,000 for a mortgage with Abbey in 1982.

The bank claimed he had misunderstood the terms and conditions of the mortgage, and it was supported by the Financial Ombudsman Service. According to Bankcheck, the experience left him £7,000 out of pocket.

“You’d expect half the mistakes to be in favour of the customer, however, they’re always in favour of the banks,” said Bankcheck director Trevor Hillen. While Alliance & Leicester said that it regularly reviewed repayments for errors, neither Nationwide nor Abbey make routine checks.

Nationwide admitted a “minority” of mistakes but, like Abbey, claimed it was confident in the integrity and accuracy of its systems.

Alliance & Leicester said new computer programmes would make eliminate any future errors.

Eddy Wetherill, of the Independent Banking Advisory Service, said: “Banks are supposed to be experts at looking after all sorts of financial services. If they are making basic mistakes with mortgages, what can they be trusted with?”

Money expert Martin Lewis said borrowers should first use a free on-line mortgage checker.

He added: “They should put in the correct terms and interest rate, and this will give them a good benchmark of what they should be repaying.”