The Financial Conduct Authority (FCA) announced yesterday that hundreds of thousands of homeowners who have been in arrears on their mortgage payments could be entitled to compensation.
A review by the regulator has found that some mortgage firms included arrears payments when recalculating a borrower’s regular mortgage payments, for example after changes to interest rates, while at the same time collecting the arrears separately through their collections process.
The impact of this is that it could take longer to clear the arrears, cause inappropriate fees to be charged and mean that the borrower was overpaying on their mortgage without realising. The FCA said that paying a higher monthly amount could result in customers struggling to meet payments on other financial commitments.
The Council of Mortgage Lenders said that lenders who used this method of calculation acted in good faith and believed they were in line with the rules.
Around 750,000 borrowers are thought to be affected, and this number could have increased since the Bank of England base rate cut in August, when more recalculations could have taken place.
The FCA say that customers do not need to do anything at this stage, as firms will contact them directly.
In the meantime they have put together an example case study to show how people might be affected.
Borrowers with mortgage arrears could be due compensation