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Westpac has revealed that approximately 40,000 home loan customers are eligible for a refund, after the bank failed to properly switch interest-only accounts to principal and interest following the expiry of the interest-only term.
As a result of the error, Westpac will refund excess interest already paid by borrowers and provide a lump sum to make up for future interest payments on the principal loan amount that had not been reduced.
In a statement to Mortgage Business, William Ranken, Westpac’s general manager of home ownership, said: “Westpac continually reviews its products and services for customers. As part of this, we identified a mortgage processing error which led to customers continuing to make interest-only repayments on their mortgage instead of being switched to principal and interest repayments at the end of their interest-only period.”
According to Westpac, the remediation process is well underway with more than two-thirds of customers notified.
Affected customers have been told that they’re not required to do anything to receive the refund and will be contacted directly by Westpac.
A support line will be set up for customers who require additional assessments.
The bank first highlighted the issue in December 2017, initially announcing that over 13,000 owner-occupier borrowers were to receive interest refunds totalling $11 million.
This follows news last month that NAB had identified further instances in which it had overcharged home loan customers after failing to properly link offset accounts to broker-originated home loans from between April 2010 and August 2017.
NAB identified an additional 4,930 customers requiring remediation, taking the total to 6,522, with refunds payable totalling over $8 million.