BREAKAGE FEES of €44,000 charged to a borrower seeking to switch from a fixed-rate to a variable-rate mortgage have been upheld by the financial services ombudsman because they were in line with the mortgage conditions.
Joe Meade said last night "the breakage fees were calculated correctly and in line with the mortgage terms in the case concerned".
Mr Meade added that his office had received 150 complaints regarding breakage fees since May, saying "each case would be considered on its merits".
For a homeowner with a mortgage of €300,000 over 30 years, repayments on a five-year fixed rate of 5.5 per cent are €1,700 a month. But repayments on a tracker mortgage (European Central Bank rate plus 1 per cent) are just €1,108.86 a month - a saving of almost €600 a month.
Thus, with interest rates falling, many borrowers who locked into high fixed-rate mortgages have sought to break the terms of their loans.
Banks typically charge customers a penalty of between three and six months' interest to do this, and breakage fees of €10,000 or more would not be unusual.
One homeowner, quoted €42,000 to leave a fixed-rate mortgage, has set up an online petition to gather support for an end to the fees. Hundreds have signed the petition against "exit fees" set up by Dubliner Jeff Kennedy.
The decision by the ombudsman follows criticism of the Irish Banking Federation (IBF) by the Joint Oireachtas Committee on Social and Family Affairs on Tuesday, for being too inflexible in dealing with borrowers on fixed-rate mortgages.
Labour spokeswoman on social affairs Róisín Shortall said she found it "impossible to understand" how banks could charge borrowers anything up to €15,000 to exit a fixed-rate mortgage.
IBF chief executive Pat Farrell defended lenders, saying borrowers were made fully aware of the redemption costs when they signed their fixed-rate mortgage contracts.
