Homeowners who remortgage are unknowingly handing over an estimated £30 million a year in excess interest to lenders because of an “unfair” double-charging practice, The Times has learnt.

Under an obscure clause hidden away in the mortgage contracts issued by all of the UK's big banks and building societies, borrowers are charged interest by both their old lender and new lender on the day the home loan is transferred, despite an almost instantaneous transfer of funds between the two. The practice is estimated to have netted the banks at least £140 million since 2002, when remortgaging soared in popularity and the number of borrowers switching loans from one bank to another passed one million for the first time.

Experts say that although the cost to individual borrowers is relatively small — about £30 a time — the double-charging is unfair because most homeowners are not aware of it, even though it affects more than a million people a year. Ray Boulger, technical director of John Charcol, the mortgage broker, said: “Most borrowers would assume they stop paying interest when their mortgage is redeemed, as it is not clear that an extra day's interest is charged. It is unfair, and most borrowers are misled about this.

“There is absolutely no justification for a lender to charge interest on a mortgage on the day cleared funds are received, as normal banking practice is to calculate interest on the balance at the close of business each day.”

A spokesman for the Council of Mortgage Lenders said: “On the day the customer switches from one deal to another, credit has been extended by two different lenders, so the borrower will normally have to pay interest to both for that day. It is impractical to try to charge interest on an hourly basis.”

Average house prices fell by 0.6 per cent in June to £178,364, the Land Registry said. This is 2 per cent lower than in July last year, the first annual fall recorded since the series began in 2000. Prices in London continue to rise.

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