What is the tracker mortgage scandal all about?
Loss-making trackers meant banks were going to target customers
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.