Yorkshire and Clydesdale Bank 'write off mortgage underpayments'

This gives hope to all households hit by the gaffe who have been asked for up to £3,500 a year extra in payments to make up the difference. (see The Remortgage Guide and First-time Mortgage Guide).

Some write-offs total a whopping £5,000. Many have reported on our forum that either the Financial Ombudsman Service has upheld their plea for the bank to cancel any past underpayments or that the lender itself has backed down following complaints and agreed to wipe-out those demands (see the Your Financial Rights guide).

Industry sources have confirmed to MoneySavingExpert.com that the Ombudsman has indeed upheld dozens of complaints in consumers' favour, though the bank is refusing to confirm a universal policy on dealing with these protests.

What happened?

The glitch meant thousands of borrowers on variable rate mortgages were underpaying for up to two years before the gaffe was discovered in June this year. Those on fixed rate deals were unaffected.

As a result, Yorkshire and Clydesdale Bank hiked monthly payment demands for two reasons: to cover past underpayments and to ensure future demands rose to the correct level.

What exactly has been written off?

While consumers will have to pay more so future demands are correct, many have successfully had the underpayments written off.

We urged those affected in July, when the news broke, to complain and ask for any shortfall to be cancelled.

The concern was that while borrowers should have paid the full amount, as stated in their contract, because the bank asked for less, many would have budgeted accordingly meaning they could be driven to hardship if forced to pay the shortfall.

Success stories

One forum user, Clydesfail, said last week: "Heard from the Ombudsman that our shortfall (nearly £5,000) will be written off in full. Obviously delighted."

Another user, crompton72, revealed: "Received a call from Yorkshire Bank to say they were prepared to consider writing off the amount I had underpaid. It was only £1,500 but a victory nonetheless. I did all the work myself and didn't need to take it to the Ombudsman."

How to complain

If you're unhappy, consider refusing to pay the shortfall by complaining to the bank.

If you don't get a satisfactory response within eight weeks or are rejected earlier, you have a right to complain to the free, independent Ombudsman Service (see the Your Financial Rights guide).

An Ombudsman spokeswoman says: "If there is no fault on the part of the consumer and they were paying their lender too little we would expect the business to cover any shortfall."

A Yorkshire and Clydesdale Bank spokesman says: "We will look at individual matters on a case-by-case basis but we have not ruled anything out regarding how we look at these cases."

Further reading/Key links

Get help: Mortgage Arrears, Redundancy help, Your Financial Rights Mortgage cost-cutting guides: The Remortgage Guide, First-time Mortgage Guide, Cheap Mortgage Finding, Ditch My Fix?