Mortgage firm errors that could cost you £57,000

By OLINKA COSTER

Last updated at 23:19 27 May 2007


Homeowners are being overcharged by up to £57,000 because of basic mistakes by mortgage lenders, financial experts have claimed.

The errors meant some customers were paying too much interest for up to 15 years.

The research by BankCheck, an independent financial auditor, investigated 30 mortgages on behalf of concerned borrowers.

The firm discovered the interest charged on monthly repayments was wrong in every case and always left the borrower out of pocket.

Simple mistakes included entering the wrong interest rate into the computer system or failing to lower an interest rate after an agreed period.

One of BankCheck's directors, Eddie Fitzpatrick, said: "Customers can be overcharged in so many ways and in many cases we think it is deliberate.

"The single biggest expense anyone-will generally have is a mortgage and we firmly believe lenders are making even more money than they should."

In one of the worst cases, a farmer was overcharged by £56,520 by Nationwide as a result of two separate mistakes. The building society refunded the money after BankCheck highlighted the problem and blamed the blunders on human error.

In another case, Terry McDowell, 52, from Ballyclare in Northern Ireland, was undercharged by Abbey for a £19,000 mortgage he took out in 1982.

But when the mistake came to light in 2004 he received a letter saying his 25-year mortgage would have to be extended for six years.

He also found his payments doubled overnight.

BankCheck estimates Mr McDowell has been left £7,000 out of pocket, although Abbey insists he misunderstood the terms of the agreement.

A 46-year- old businessman who took out a £15,000 mortgage with Alliance & Leicester in the 1980s was charged 11.75 per cent instead of 11.25 per cent for 15 years.

Alliance & Leicester later claimed the wrong figure was keyed in and refunded £2,189.

The problems centre on repayment mortgages, where the customer pays off part of the loan and some interest each month, because their complexity can make it hard to spot mistakes.

Customers also become confused about how much they owe after switching mortgage providers or moving house.

However, lenders insist the errors are 'one-off' mistakes and that their systems are robust.

The Daily Mail highlighted one problem with mortgage calculations eight years ago.

Our research showed how most banks and building societies calculated interest owed on a loan just once a year, meaning that for 11 months borrowers were being charged interest on money they had already repaid.

Lenders promised to switch to charging interest on a daily basis, but many dragged their feet over the issue, making excuses such as the difficulties in changing computer systems.

A spokesman for Nationwide insisted mistakes occurred only in a 'minority of cases', adding: "We are confident in the integrity and accuracy of our systems."

A spokesman for Abbey said: "Checks are built into our mortgage processes. We are confident that this process is robust."

Alliance & Leicester said its new computer system meant the type of mistakes uncovered in the audit could not happen again.

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