What is the tracker mort­gage scan­dal all about?

Loss-mak­ing track­ers meant banks were go­ing to tar­get cus­tomers

The Irish Times - - Home News - Conor Pope

What is the tracker scan­dal about?

In very sim­ple terms, it has at its core a fierce de­ter­mi­na­tion on the part of mort­gage lenders over the last 20 years to force as many peo­ple as they pos­si­bly could off loss-mak­ing tracker mort­gages in the post-crash pe­riod.

What is a tracker?

A mort­gage rate tied to the rates of­fered by the Euro­pean Cen­tral Bank (ECB). Typ­i­cally dur­ing the boom years, tracker rates would have been some­where be­tween 0.7 and 1.2 per cent above the ECB rate.

That sounds grand, why would banks want to force peo­ple off them?

In the post-crash pe­riod bor­row­ing be­came ex­tremely costly for Ir­ish banks. They could not get their hands on cash at rates any­where close to the rates they had com­mit­ted to of­fer­ing all tracker holder for the life­time of their mort­gages. That meant the every one of the hun­dreds of thou­sands of tracker loans they had given out were ac­tu­ally cost­ing them money.

Whose fault was that?

Oh, it was en­tirely the banks’ fault. They were the ones who had over-extended them­selves with lend­ing prac­tices which could most kindly be de­scribed as loose. And they were largely to blame for the crash which cost the Ir­ish tax­payer – and Ir­ish tax­pay­ers yet to be born – bil­lions of euro. On every sin­gle level the banks were to blame.

What kind of money are we talk­ing about here?

Given that the of­fi­cial ECB rate is just 0.05 per cent, a per­son on a tracker is pay­ing an in­ter­est rate of be­tween 0.8 per cent and 1.3 per cent on their home loan. Typ­i­cal vari­able rates, mean­while, hover be­tween 3 per cent and over 4 per cent.

If some­one has a 25-year, ¤200,000 tracker mort­gage and is pay­ing 1 per cent over the ECB rate they pay about €750a month. A vari­able rate mort­gage holder ow­ing the same money over the same term will pay around ¤1,110 a month.

If some­one was moved from their tracker mort­gage in 2008 and only found out about it last year they may have ended up pay­ing ¤33,600 more than they should have. Over the course of a mort­gage you could be look­ing at over­pay­ments of more than ¤80,000.

So when did all this start?

For the thou­sands of peo­ple caught up in it, it started 10 years ago. That is when the banks re­alised they had not done their sums and when it dawned on them that track­ers may not have been so clever.

If the banks were up to no good why did the Fi­nan­cial Ser­vices Om­buds­man not stop them?

Why, in­deed. Ques­tion marks hang over the role played by the FSO. Many peo­ple took cases to it and to ar­bi­tra­tion com­mit­tees and lost.

When did the scan­dal come to light?

For years up un­til 2015 there were mur­mur­ings that banks were forc­ing peo­ple off track­ers for the flim­si­est of rea­sons but it was not un­til the sum­mer of 2015 that the story reached a cli­max in courts when PTSB lost a case taken by two cou­ples who had claimed their mort­gage ac­counts had been mis­man­aged by the bank. After that it emerged that Per­ma­nent TSB and its sub­sidiary Spring­board Mort­gages had mis­man­aged the ac­counts of al­most 1,400 mort­gage cus­tomers with the re­sult that some lost their homes.

What hap­pened then?

The case prompted an en­force­ment in­ves­ti­ga­tion by the Cen­tral Bank which iden­ti­fied “sig­nif­i­cant fail­ures” by both PTSB and its sub­sidiary com­pany, con­nected to tracker mort­gage op­tions and rates. Among the is­sues iden­ti­fied by the in­ves­ti­ga­tion was PTSB’s fail­ure to in­form cer­tain cus­tomers of the con­se­quences of their de­ci­sions to break early from a fixed rate or dis­counted tracker pe­riod.

What were the con­se­quences of break­ing out of a fixed rate?

Well one of the con­se­quences of break­ing early was that some lost their con­trac­tual right to be of­fered a tracker rate when their fixed rate or dis­counted tracker pe­riod would have ended. But the bank did not tell peo­ple that. It also failed to in­form other cus­tomers of their right to be of­fered a tracker rate at the end of any fixed rate pe­riod.

And that was that?

No. As a re­sult of the PTSB rev­e­la­tions, the Cen­tral Bank looked into the prac­tices at other banks.

And what hap­pened then?

The scan­dal grew and grew. Last De­cem­ber the Cen­tral Bank dis­closed that “at least” 8,200 home­own­ers had been im­prop­erly de­nied a tracker mort­gage by their lender and said those af­fected in the scan­dal could be as high as 15,000.

Where are we now?

The banks have yet to deal sat­is­fac­to­rily with all the peo­ple whose lives they so badly af­fected. And it will be well into next year be­fore they do so which means that for many of the im­pacted they will have en­dured a lost decade and end­less tor­ment at the hands of banks who used to – and still do – claim that they care deeply about their cus­tomers.

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