Tracker victims just the tip of the iceberg that is our national mortgage scandals
OVER the past week, we have heard the heart-rending stories from people who lost their tracker mortgages unfairly. In particular, we saw the four victims telling their stories at the Oireachtas Finance Committee.
But something has been overlooked in the discussion.
People who lost their tracker mortgages were victims of not one but two banking scandals.
Not only did they lose out in the tracker mortgage scandal, but they were also victims of the standard variable rate (SVR) mortgage scandal. The cheap tracker rate which they lost was replaced by the highest SVR in the whole of the eurozone.
Across the eurozone, the average rate for a new mortgage is about 1.8pc. If an Irish tracker customer with a €300,000 mortgage had unfairly lost a tracker rate of 1pc and paid 1.8pc instead, it would have cost them an extra €100 a month. While this is a significant amount, for most people it would not have been life-changing. They could have cut back elsewhere and found the additional money.
But if they were charged 4.5pc instead of 1pc, they were paying an extra €500 a month.
There is a life-changing difference between €500 extra a month and €100 extra a month. It pushed many responsible customers into the shame and desperation of arrears.
It is why some of them lost their homes and had their lives destroyed. Whereas they could have adapted to an additional €100 a month, €500 was just too much.
But while there are 20,000 people affected by the tracker mortgage scandal, there are 300,000 affected by the SVR scandal.
The lenders’ delay in redressing the tracker victims is frustrating, but those affected will eventually get back what they were overcharged and they will get compensation as well.
There is no such hope for the SVR victims. They never had trackers, so they weren’t as obviously robbed by the banks. But they are paying 3.4pc on average for new business compared to 1.8pc in the rest of the eurozone. Many of them are in fact paying standard variable rates of 4.5pc. While the impact on each individual customer is not as great as the lost tracker, there are 10 people affected by this for every one customer affected by the lost tracker issue.
The effects are still serious. They are spending between €200 and €400 more a month on mortgage repayments, money they could be spending on their families. In most cases, they can cut back elsewhere and they manage somehow. But in some cases, the extra amount is too much and it pushes them into arrears.
Once they go into arrears, their credit record is destroyed, so they can’t trade up if they need to move
It pushed many people into the shame and desperation of arrears.
house. Nor can they switch lender to avail of a lower rate from a different lender.
And look at the official response. The Taoiseach has called on the banks to do the right thing by the people who lost their trackers. But not a peep out of him about the 300,000 victims of the SVR scandal.
WHILE the Central Bank has devoted huge resources to sorting out the tracker mortgage scandal, they have done everything in their power to stall and stop Fianna Fáil TD Michael McGrath’s bill to halt the SVR scandal.
It is estimated that the tracker mortgage scandal has cost the banks around €163m so far, and the cost will probably rise to around €300m. But that is a one-off cost.
The self-same banks are making around €750m in extra profits, each and every year, by overcharging their SVR customers. While they lose only once on the swing, they gain every year on the roundabout.