30,900 mortgage customers due refunds after fee mistakes

17 February 2014, 19:17   By Julia Kukiewicz

30,900 Yorkshire Building Society customers will be refunded administration fees they paid on arrears from next week.

mortgage concept
Credit: Jirsak/Shutterstock.com

The average customer will get £247 back as a result of a Financial Conduct Authority (FCA) investigation into fees which concluded that many households that fell into arrears were charged incorrectly.

Mortgage lenders can only charge administration fees when their customers go into arrears for more than two months.

But the FCA found that many customers were charged before that, hurting households already struggling to meet their repayments.

The number of people behind with their mortgage has increased 20% since the start of the recession, according to Citizens Advice.

Yet help from lenders and Government, in the form of the Support for Mortgage Interest scheme, has shrunk.

Fee refunds: who's owed money?

Around 30,900 households that went into mortgage arrears with Yorkshire Building Society or one of its subsidiaries (Chelsea Building Society, Barnsley Building Society or Accord Mortgages) after January 2009 are due a refund.

To keep things simple, all customers that were charged fees during this period will get a refund, even if they were charged correctly.

In addition, the lenders have been ordered to get in touch with customers due refunds directly.

Letters will be sent out to customers detailing the amounts they're due to receive from next Tuesday, February 25th.

Interest will also be paid on the refunds.

Think you're owed?
More information on:
0800 9230045 or 01242 874 998
(9 to 5, Monday to Friday)

Customers that are unsure whether they're due a refund or feel concerned that their lender will be unable to get in touch with them - for example, because the property is let or the mortgage is now repaid and they are living elsewhere - can contact Yorkshire Building Society's customer relations department (see right).

Those that are entitled will receive their redress as a credit on their mortgage account statements or, if the mortgage is paid in full, in a cheque.

However, for those hit with extra fees just as they were most financially vulnerable the damage has already been done.

Mortgage arrears time bomb

At the end of 2013, 1.29% of mortgages were in arrears. The peak, in late 2009, was 1.88%.

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Debt: homes at risk

Repossessions have also fallen in the past year as employment steadies and banks make greater efforts to keep people in their homes.

However, experts warn that households currently facing higher living costs will be highly likely to fall into arrears when interest rates increase.

According to a report produced by the Resolution Foundation late last year, if interest rates slowly increase to 3% by 2018 it will mean that 1.12 million households will have to spend more than 50% of their pay packets on mortgage repayments.

The more than 50% mark is widely agreed to be a point of over indebtedness and to greatly increase the chance of homes defaulting on their mortgages.

Help shrinks

In addition, the amount of Government help available for those facing mortgage arrears is set to shrink next year.

Currently, those struggling with their mortgage can claim up to £200,000 through the Support for Mortgage Interest Scheme.

The help is available 13 weeks after the mortgage holder starts to claim the benefit or benefits which mean they qualify for help. That's Income Support, Job Seekers Allowance or Employment and Support Allowances based on income or Pension Credit.

Under radical new changes set to take place in 2015, however, those facing mortgage arrears will only be able to claim up to £100,00 and will have to wait 39 weeks.

Most significantly, the benefit will become a loan.

The withdrawal of Government help could come at the worst possible time for homeowners.

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