Where do I find out if I’ve been on the wrong rate for my mortgage as I’m on a tracker mortgage which has been from 3.25 per cent since 2008 and has now risen to 3.75 per cent with another increase due next month to 4.5 per cent? Obviously I’m trying now to find a fixed-rate deal on a switcher mortgage. But how do I find out if I have been overcharged for the past few years?
We still have 25 years left on our mortgage with a balance of over €200,000.
Last week saw a record €100 million fine imposed on Bank of Ireland, the last of the investigations into Irish lenders over tracker mortgages to be concluded by the Central Bank, albeit with the outside possibility of more personal action against individual bankers yet to emerge.
Yet, at the weekend, a headline in one of the papers highlighted that another lender, KBC, had made further payments of €10 million to over 60 customers over tracker mortgage irregularities after the Central Bank concluded its investigation into that bank in 2020, with a fine of €18.3 million.
And the figures quoted in relation to KBC would indicate that the compensation paid to the cases settled after the Central Bank concluded its investigation are a multiple of the settlements agreed by KBC earlier in the process, on average. And it is not alone. A significant number of cases have arisen even since the Central Bank thought it had caught them all.
The Financial Services and Pensions Ombudsman, which handles issues of mis-selling by financial services firms, including banks, says it is still receiving new complaints on this issue this year – well over a decade since Irish lenders stopped offering tracker mortgages.
The Bank of Ireland fine, interestingly, includes “failings” and regulatory breaches by the bank as recently as June of this year, so this remains very much a live issue and it is quite clear that Irish banks remain in something of a state of denial over the whole tracker mortgage issue.
All of which is to clarify that this is clearly a live issue. The concern is why it has taken you till now to realise there is a problem. The Central Bank did make clear to lenders that it did not expect them to raise any time limit defences – ie arguing that complaints to the ombudsman or the courts were out of time. However, there is some evidence that some banks have sought to do so.
But if you think you have an issue here, you need to pursue your query on what has happened with your tracker mortgage rate over the years, and whether your lender has a case to answer.
Again, like the reader who was in touch with us on this subject a couple of weeks ago, you don’t give details of who your lender is. There is also a little question mark over the rate you quote.
You say you have been on a tracker rate of 3.25 per cent since 2008. Tracker rates, by definition, track the interest rate movements at the European Central Bank – with a margin of about one percentage point or so built in by the bank. Back in 2008, the ECB rate started the year at 4 per cent before rising to 4.25 per cent in one of the more spectacular missteps by the bank in July 2008 just two months before the collapse of Lehman Brothers turned a liquidity squeeze into a full-blown financial crisis.
In October and November, it backtracked, dropping interest rates by half a point each time to 3.75 and then 3.25 per cent before taking even more dramatic action in December to bring the rate down to 2.5 per cent.
At 3.25 per cent, your rate could only have been agreed in December. And, if so, you definitely secured a very good rate, with a margin of just three-quarters of one percentage point.
Let’s assume that’s what happened. The ECB kept cutting rates from the very next month, January 2009, up to May that year when the ECB rate was 1 per cent. In 2011, that rate rose briefly as high as 1.5 per cent before moving down again in a number of steps over several years until 2016 when it hit zero.
On the basis of your information, your tracker rate should have moved 14 times between 2008 and 2016, culminating in a rate of 0.75 on your mortgage from March 2016 until July of this year.
That clearly hasn’t happened although your lender has certainly applied the half-point increase in July and has now indicated they will pass on the three-quarter point rise agreed by the ECB last month. More rises seem inevitable, starting this month with the market now betting increasingly on another three-quarter point rise.
So what now? First, check your paperwork. Are you definitely on a tracker mortgage rate? Don’t assume just from the recent rate rises. The mainstream lenders say they have not yet increased variable rates and, if you are in the middle of a fixed rate, they can’t hike it, but just be sure before you go further.
Assuming you are right, there is a clearly set procedure for financial services complaints as outlined by the Competititon and Consumer Protection Commission (CCPC).
It requires you to try to sort the issue out first with your lender. Contact your branch manager or customer care service and let them know the concern, that you want it checked and, assuming you are correct, you want proposals on what they are going to do about it.
If you are not satisfied with the response or if, as is more likely, they direct you to their formal tracker-mortgage complaint procedure, you move to stage two. At this stage, you will be making a formal complaint. The lender is obliged to inform you, on request, to whom you should send this complaint.
You need to be clear in your letter that it is a formal complaint – no fudging – and include all relevant details, such as your account number, the terms of your loan, the date it was agreed etc. You can do this over a phone but I strongly advise that it is done in writing.
The lender then has five working days to acknowledge receipt of your complaint and details of who is dealing with it. Within 20 days, they have to let you know how it is progressing and within 40 working days, they must give you a decision or tell you how long such a decision will take.
If you are not satisfied with the decision, or if the process is not working or subject to unreasonable delay, you can then apply to the Financial Services and Pension Ombudsman who is still dealing with over 1,000 tracker cases even at this stage. You cannot fast-track things straight to the ombudsman; you must go through the steps of the formal complaints procedure first.
Certainly if you have a tracker mortgage, something is wrong. But if this is a restructured loan of some sort, there might be another explanation – although a tracker should have seen the rate fall as early as January or February 2009, so something is odd.
From your figures, it would appear you have a 39- or 40-year mortgage. That’s not impossible if you bought at a young enough age but it would certainly be unusual.
The basic message is to be sure of your facts before you proceed but, having said that, don’t long-finger things. Find the paperwork and trigger the complaint procedure. There may be an explanation but, on the scenario you present, it would seem you have not got the rate you should have, or at least the one you thought you had.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to firstname.lastname@example.org. This column is a reader service and is not intended to replace professional advice