Leeds reviews charges

LEEDS Permanent Building Society is reviewing the way insurance premiums are levied after home buyers' complaints, writes Vivien Goldsmith.

Mark Farrar, an economics teacher, was not exactly delighted when the annual buildings and contents insurance on his 1930s house in Norwich rose by pounds 85.50 to pounds 494 - an increase of more than 20 per cent.

It annoyed him that no reference was made to the percentage increase. 'Presumably this is to discourage comparison,' he said. He found he could obtain similar cover for half that sum.

But what has really angered Mr Farrar is that he is expected to start paying the higher premiums from 14 April even though the policy is not due for renewal until 24 June.

He wrote to the society in strong terms. 'As far as I can see it, this is verging on theft. I have to start paying higher premiums three months before the policy comes into effect. The overpayment is credited to my account later, but without interest. So without telling the customer, you get them to pay more than they should, pocket the money a few months, earn interest on it, but pay none to the customer.'

Leeds said that it operates the insurance premiums as part of the mortgage account. They are set in March, take effect in April, but a spokesman confirmed that the insurance year runs from June. The society's financial year runs to the end of September. This is when any overpayments are taken into account and a new mortgage level worked out.

More than 80 per cent of the Leeds' 500,000 borrowers are on annual review. The society writes to them every October to set a single new monthly payment to start in November for all the mortgage costs including insurance premiums.

A Leeds spokesman said: 'We feel the insurance system we operate is fair, but will be reviewing the procedure in light of recent premium increases. In the majority of cases the sums we are talking about have been pennies rather than pounds, over a two- or three-month timescale.

'It must be stressed that any early premium payments are not used for other purposes by the Leeds - in every case the money is credited to the mortgage account and reduces the customer's outstanding debt, thereby lowering the mortgage interest due on the loan.'