Mortgage repayment row rolls on

The clarification came from the FOS as it revealed a rise in the number of complaints about lenders calculating repayments incorrectly. The revelation that thousands of Clydesdale Bank borrowers have been underpaying on their mortgages - and now face repayment increases as a result - is behind the increase.

It was revealed in July that some 18,000 Clydesdale customers on variable rate mortgages, including 10,000 in Scotland, face repayment hikes after underpaying an average of 800 due to a miscalculation by the lender.

The bank asked them to make the correct monthly repayments plus an additional amount to cover the shortfall, but with some facing repayment hikes in the hundreds of pounds, the bank has faced calls for compensation.

Clydesdale, which is dealing with cases individually, has paid out sums of around 300 to 500 to some complainants, but others have taken their case to the FOS.

The ombudsman has now summarised the approach it takes to such complaints, which it said usually arise after a lender has accidentally quoted an interest-only rather than a repayment figure, or used the wrong mortgage term as the basis for repayments.

Deciding whether compensation is due depends on whether the lender can be proved to be "entirely to blame", it confirmed. A typical such case is where the mortgage offer quoted an incorrectly lower monthly repayment; the borrower paid it believing it to be correct; and the borrower raised the problem as soon as it became evident.

In such cases the lender is usually asked to write-off the capital shortfall in order to compensate for the opportunity the borrower lost to make higher repayments. But the FOS will not usually compensate borrowers for the "future inconvenience" of making extra payments

• For more information - www.financial-ombudsman.org.uk