Thousands of Abbey customers have been forced to spend up to 15 additional years repaying their mortgage, after the bungling bank failed to notify them of changes to their repayments.
The mistake could add thousands of pounds in interest to customers’ total bills. The regulator has confirmed many may be entitled to compensation, but warns they only have until October to come forward.
The problems started when Abbey repeatedly extended mortgage periods – and the size of repayments due – following interest rate fluctuations between the late 1980s and 1993, but failed to explain this to all of its repayment mortgage customers.
Shabby Abbey at it again
Customers on these mortgages make repayments based on the interest on the loan plus the repayment of capital.
But Abbey failed to increase customers’ monthly payments when interest rates shot up – or even notify them that higher payments were needed to maintain status quo.
That meant a larger portion of customers’ payments were going on interest than capital, causing some unsuspecting customers’ repayment periods to jump from 25 years to up to 40 years.
Those affected need to come forward
The Financial Ombudsman Service (FOS) ruled that Abbey had failed to properly explain to customers that the length of their mortgages could be extended if they did not increase their monthly payments.
It adds that “several hundred” Abbey customers had already come forward, as the October deadline looms ever closer. If you are one of those affected, make sure you contact the regulator before time runs out.
Those who have taken out a mortgage recently needn’t worry about encountering similar problems, as the length of a mortgage is generally fixed now, with repayments changing according to interest rates.
Abbey attracts even more criticism
As if Abbey hadn’t brought enough bad publicity on itself already, the bank has now come under fire for trying to sidestep a Financial Services Authority (FSA) crackdown on mortgage exit fees for new customers.
The FSA decided that lenders were charging customers far too much for switching providers, and told them to remove, reduce, or justify the fee by month’s end.
But instead of moderating the fees – which have more than tripled in recent years – Abbey stands accused of merely renaming it as a ‘mortgage administration fee’ to get around the clampdown.
It remains to be seen how the regulator will interpret the move, but it’s hardly likely to earn any favours with them – or the public. It does however serve as yet another example of how mounting fees now play a massive role in the total cost of your mortgage, especially on smaller amounts. To learn more, read our article on fees here.
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Using Equity Release To Pay Off Mortgage
Equity release can be used to repay an interest-only mortgage, but those considering this option must ensure that their home has enough equity that can be used to repay the mortgage. … Also depending on the type of equity release that is taken out, a low loan-to-value (LTV) may be the only option offered.