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Today, most home buyers are advised to open an offset account linked to their mortgage, leading to savings of thousands of dollars on their home loans. However, many NAB customers continued to pay heavy interest on their home loans between April 2010 and August 2017, as the bank failed to correctly set up offset accounts for several borrowers during the period.

Following complaints from many customers, the bank conducted an internal review to find 966 home loan customers had been overpaying interest on their home loans.

 
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These customers represent “0.73 per cent of the total number of offset accounts established through our broker channel since 2010 (approximately 178,000),” confirmed NAB home lending general manager, Meg Bonighton. The banking giant refunded $1.7 million to 966 home loan customers after admitting its failure to set up mortgage offset accounts properly.

The news comes soon after Westpac’s revelation that it had overcharged 9,400 home loan customers $11 billion due to a system error wherein the bank failed to switch interest-only customers to principal and interest mortgages after the interest-only period was over. The error affects home loans that go back over two and a half decades.

Earlier this year, Commonwealth Bank’s Bankwest division had refunded $4.9 million to 10,800 home loan customers for offset accounts not being set up properly.

An offset account reduces the amount of interest you pay on your home loan as the account balance is deducted from the loan principal, and the interest is only payable on the balance. For example, if John owes $300,000 to the bank and has $75,000 saved in his offset account, he only pays interest on $225,000 instead of the entire amount he owes to the bank. However, with half of the big 4 banks having failed to set up offset accounts properly for their customers, many borrowers ended up paying extra, the total amounting to several million dollars.

NAB self-reported the issue to the Australian Securities & Investments Commission (ASIC) earlier this year, as the bank approached PwC to investigate its accounts because of some customer complaints.
“Consumers should be confident that when they sign up for a home loan, they are receiving all of the benefits that are being promoted,” said ASIC chairman Peter Kell. “Where there are errors there should be timely and appropriate action to ensure that consumers are not any worse off as a result of the mistake,” he added.
As per latest reports, NAB confirmed that all customers identified through the review with an open account had been contacted and received refunds. According to ASIC, customers who have already paid off their home loan earlier this year would also be refunded so that they were charged only the interest that would have been payable if the account had been set up correctly. Any NAB customers with queries could contact the bank on 1800 152 015.


Borrower Beware

With three of the big 4 banks overcharging customers over extended periods due to system errors, it is only too evident that borrowers need to be doubly sure of their mortgage T&Cs, as well as, review their home loan regularly, to know how much they are paying as interest at any point in time.

While the affected customers of the banks have been made good their losses, many of them have already paid off their loans, having struggled for 20 years or more, when they could have saved all this money to pay off their mortgage faster or used it to fulfil other life goals.

It also helps to set up your home loan through an experienced broker who would not only suggest best-fit home loans for your requirement but also do all the legwork on your behalf. Besides, a broker would stay with you throughout the life of your loan, helping you review the loan periodically, to ensure you are not paying any more than you should!

Start by comparing competitive home loan deals here or speak to a mortgage broker to know more.

 

By Vidhu Bajaj,
HashChing Content Writer

 

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