• Borrowers were told they had underpaid and were in arrears
• Those who complained to FOS could have shortfall written off

Mortgage borrowers who have been told by their lenders that they owe thousands of pounds because they have underpaid their mortgages for several years may be entitled to have the outstanding amount written off.

In July about 18,000 borrowers with the Clydesdale and Yorkshire banks were told that because of successive errors made by the banks in calculating their mortgage payments they would have to repay a lump sum or make increased monthly payments for the rest of their mortgage term. Some homeowners were told they owed more than £7,000 and their monthly premiums would rise by as much as £700.

But some borrowers who complained to the Financial Ombudsman Service (FOS) have now been told that the Clydesdale has agreed to write off the entire shortfall, putting the borrowers back into the position they would have been in had the bank not miscalculated payments.

Writing in a forum on the MoneySavingExpert website, a borrower called biffo_the_bear said: “Have just received a phone call from the ombudsman dealing with my complaint, and she informed me that their proposal to the Clydesdale – which they have accepted – was that they should make good 100% of the shortfall – that is put me in the position I should have been in had they not cocked up.

“That, by the way, is £7,800. My decision to go to the FOS has been vindicated, and I think anybody who is vascillatiing [sic] over whether or not to go to the FOS should use this to spur them on. This problem is entirely of Clydesdale’s making, and they know it, so please reject out of hand any offer they make you and go to the FOS, it is free, you have nothing to lose, and they are very helpful.”

Another called MrNiceGuy said: “I have just heard from the Financial Ombudsman who have confirmed that Clydesdale Bank have agreed to write off the shortfall that has occurred on my mortgage account. My shortfall was approximately £5,000. Since mine has been written off then I see no reason why this shouldn’t apply to everyone with the same issue.”

Poster Clydesfail has had nearly £5,000 written off, but is still critical of the way the bank has handled the situation: “I suggested that instead of forcing me to go down the FOS route, they could instead generate some goodwill by putting up their hands and admitting that yes, they had messed up, but they would now proactively write off the shortfalls of customers affected. That way they could at least be seen as, if not the good guys, then a bank which has the interests of its customers at heart, acknowledges mistakes, listens….an opportunity to turn a negative story into one which portrays the bank in a (comparatively) favourable light.

“But no, instead they tried to fob me off with a “fair and reasonable” offer of a few hundred quid, which I rejected. So well done Clydesdale. Yes you will probably claw back some money from those who haven’t gone to the FOS and accepted your compensation payouts. But otherwise you’ve simply managed to alienate your own customers even more, whilst managing to bolster your growing image of general incompetence.”

The Clydesdale said it had made fulsome apologies for its error and the problems it had caused customers, and that most had accepted they should repay the outstanding amounts. In most cases this amounts to an increase of less than £25 a month, the bank said.

A spokesman said the banks did not intend to write off the total £19m outstanding, despite the ombudsman’s rulings: “Some customers have gone to the ombudsman and it has found in their favour, but we are continuing to deal with each case on its merits.”

Instead, the Clydesdale and Yorkshire banks will offer a mixture of solutions to any financial difficulties caused by the repayment of the shortfalls, including extending mortgage terms, offering interest-free loans and offering a small write-off of the amount in arrears.

Personal finance and money news, analysis and comment | guardian.co.uk

A miscaculation by the Yorkshire and Clydesdale banks means some mortgage holders could be asked to repay up to £300 more each month

Thousands of Clydesdale and Yorkshire Bank mortgage customers are facing higher monthly payments after the providers, owned by National Australia Bank, said they had miscalculated repayments on some of their variable and tracker rate mortgages.

The banks said 18,000 customers have been left with a shortfall on their mortgages, all of who have now been asked to pay the correct monthly amount plus an additional monthly sum to meet the shortfall. According to a spokesman for Yorkshire Bank the affected products are “some variable rate mortgages on which interest is calculated daily, which will include some trackers.”

Around 10,000 of the victims are Clydesdale customers in Scotland, with the remainder Yorkshire Bank customers. In total, £19m has been underpaid with an average individual total underpayment of £800. However, some homeowners face soaring repayments of up to an extra £300 a month.

One mortgage payer, writing on the MoneySavingExpert forum, said: “They are asking for an extra £200 per month for the remaining nine years of our mortgage. This is in excess of £21,000. How is this possible?”

The problem began in 2005 when a mathematical error resulted in over or underpayments being made whenever the Bank of England base rate moved up or down sharply. When rates plummeted in late-2008 to early-2009 customers were not asked to pay enough.

The bank said there were options available to customers, including making a one-off payment to cover the shortfall or extending their mortgage term, and both providers were dealing with problems on a case-by-case basis.

A spokesman for Yorkshire Bank said: “[The banks] have been speaking to the Financial Services Authority and the Financial Ombudsman Service (FOS) about how best to handle this, and they wanted to do it the right way.”

Steve Reid, retail director for the Clydesdale and Yorkshire Bank, said: “We are very sorry that this error has happened and for any inconvenience it may have caused those customers affected. We would like to reassure mortgage customers that they need take no action unless they have received a letter from us.

“The vast majority of our customers are not affected and, of those that are, 99% have already received their letter advising them of the specific impact on their account. The other 1% will hear from us in the next couple of weeks advising them of options to bring their account back on track.”

But Dan Plant, a money analyst at MoneySavingExpert, said: “This huge error could push many borrowers into difficulties paying their everyday bills, as the massive hikes in mortgage payments are unlikely to have been budgeted for.

“However, unlike when customers miscalculate payments and get slapped with huge £30-£40 charges, here the bank has messed up but the customers are still feeling the brunt.”

The website said customers could demand not to pay the shortfall or try and come to an agreement where they only pay a percentage of the cash due. If customers don’t get a satisfactory response within eight weeks or are rejected earlier, they have a right to complain to the independent FOS.

Personal finance and money news, analysis and comment | guardian.co.uk