PHOTO: Westpac

Westpac is set to pay back tens of millions of dollars to around 40,000 home loan customers after a manual processing system glitch.

The mortgage holders were left on interest-only loans after the term expired, instead of being converted to a principal and interest rate, News Ltd papers have reported.

It is believed Westpac will be paying back under $100 million.

The glitch, which affected Westpac, St George, Bank of Melbourne and Bank SA, meant mortgage holders of the named banks were not paying down the principal as planned.

So when interest rates rose, unaware customers would have found themselves out of pocket.

Westpac identified the issue in 2017, but the details are only just coming to light.

It has been reported that each customer who has been affected will have been contacted, with around 70 percent of customers having received their reimbursement.