Money Grouse: Festive delay leaves increased mortgage

COLIN and Martha Sullivan had a mortgage for just under pounds 60,000 with Abbey National, due to be paid on the 25th of every month.

Sometimes the payments, made by standing order, were a little late in arriving. Abbey National did not accept direct debit payments.

When this happened in December, and the payments did not arrive for a week before the new year, the account showed a deficit for the year-end, when the balance is struck. The capital outstanding was increased so further interest was due on the unpaid sums.

Abbey National's deputy manager at the secretariat, John Habgood, wrote to the Sullivans to say they should have been alerted to the debt built up by the rise in the balance shown on the annual mortgage statement.

'Both the conditions of your mortgage offer and the mortgage clauses make it clear that interest is charged for a year based on the balance outstanding at the end of the previous year, and so interest was correctly charged on this higher balance.'

The Sullivans, who live in Leamington Spa, Warwickshire, also accumulated arrears because they failed to increase the monthly standing order of pounds 13.87 set up to pay building insurance premiums, and later the contents insurance premiums as well.

The mortgage - an interest- only loan backed by a pension policy - is now about pounds 1,300 larger than at the outset six and a half years ago.

Abbey National made an ex gratia payment of pounds 50 to compensate the couple for a long correspondence on the subject, and has agreed to accept payments until the end of January to reduce the year-end balance for 1992. The Sullivans have decided to take advantage of this.

But Mrs Sullivan believes they should have been given more warning about the debt. 'December is particularly difficult because the 25th is Christmas Day and there are public holidays after that. It is quite easy for a payment to slip into January. People should be warned about the danger of having payment dates near the end of the month. None of this would have happened if the mortgage had been due early in the month.'

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