Clydesdale to pay out after mortgage error

Published on Tuesday 28 December 2010 15:59

Clydesdale Bank has been ordered to compensate a proportion of its mortgage customers whose repayments were increased after a computer error.

Those due to receive a settlement are among the 18,000 Clydesdale customers on variable rate mortgages - including 10,000 in Scotland - who faced increases in their monthly repayments after the lender and its sister firm, Yorkshire Bank, miscalcuated their payments.

Some borrowers are understood to have won a 9,000 payout after the Financial Ombudsman Service (Fos) ruled in their favour.

However, it is believed that just 100 cases are still under investigation by the Fos, while the remaining customers have come to an agreement with the banks.

The affected borrowers were informed they had been charged too little each month, and that their monthly repayments would be increased by up to 500. Customers were given the option of higher monthly repayments, making a one-off payment to clear the shortfall, or extending their mortgage term.

Fos has ruled in favour of some customers - but a spokeswoman declined to reveal exactly how many of the cases had been settled, or their outcomes.

She said: "If a customer feels there is a problem, they should first complain to the firm, then they can bring the case to the ombudsman for free."

Glasgow-based Clydesdale said the problem related to an error in the calculation of mortgage repayments when interest rates changed.

A spokesman said: "This error, when combined with last year's rapid series of interest rate cuts, meant that some customers with variable-rate mortgages were paying less than the amount required to repay their loans within the required term.

"Of the customers with shortfalls we wrote to, about half would see their payment rise by under 25, of which about 2 to 3 was to repay the shortfall over the remaining term of their loan."