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July 2, 2007

Abbey Borrowers Face Lengthened Mortgage Terms

Story link: Abbey Borrowers Face Lengthened Mortgage Terms

Some homeowners who have mortgages with Abbey may have to face the prospect of paying their mortgages for 15 years longer than expected, as a result of a communications error made by the bank in the late 1980s and early 1990s.

The number of borrowers affected could be in the thousands because the bank routinely extended mortgage terms in response to interest rate rises, although customers were never advised of this fact.

Many Abbey borrowers will be paying substantially more for their loans than expected because they have paid off a lower proportion of the capital on their loans as a result of the bank failing to increase repayments to take into account interest rate rises.

The Financial Ombudsman Service has dealt with several hundred such cases and whilst it is still receiving complaints, an October deadline has been imposed, after which no new cases will be considered.

The Service has already ruled that some borrowers could be entitled to compensation because between 1987 and 1993, Abbey did not make it clear to borrowers that mortgage terms could change.

Such a situation is unlikely to reoccur as currently the majority of mortgages have fixed terms, so that repayment levels fluctuate with interest rates.

 

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