Borrowers will pay price over banks’ €500m tracker f iasco

Experts’ warning to mortgage holders

THE €500m cost of the tracker mortgage scandal will be passed on to consumers, observers are warning.

Any hopes long-suffering borrowers might have for much-needed interest cuts may be dashed as a result of the swindle, experts and opposition politicians have said.

Mortgage broker Michael Dowling, who has dealt with tracker cases, described fining the banks as ‘a drop in the ocean’.

‘The only way is to hold people responsible, especially if there’s any evidence of criminal activity,’ he said.

Mr Dowling also criticised the Central Bank’s non-aggressive approach. ‘How do you compensate someone who lost their family home?’ he asked.

‘Some banks are offering 10% [compensation], others 15%. Why are the banks dictating their own different rates?

‘This scandal is a clear example of why we must have clear water between the Central Bank as a prudential regulator [to ensure banks don’t go bust] and a separate independent body to protect the consumer.

‘The Central Bank is very good at putting pressure on a small independent broker or a little credit union. Give them a financial institution of any size and it’s a different story,’ he said.

So far, only three out of 15 lenders are offering compensation to consumers and Mr Dowling warns borrowers to brace themselves for a less favourable mortgage climate.

‘The full [estimated] €500m cost of the scandal will be passed directly on to standard-rate mortgage holders,’ said consumer advocate Brendan Burgess of Askaboutmoney.com.

He said there were two scandals: the tracker issue and the scandalously high standard variable rates that the rest of us pay. These average around 4%, compared to 1.83% in the rest of the eurozone, which is not much more than the trackers charged.

The problem encountered by people on losing their tracker was the extremely high variable rate.

‘People on standard variable rates have lost their homes when they could have kept them if they had been on a fair interest rate,’ said Mr Burgess.

Fianna Fáil’s finance spokesman Michael McGrath said: ‘The very high non-tracker rate made it worse. There is a wider issue, that multiples of the people who were affected by the tracker problem are affected by the SVR issue.’

Mr McGrath demanded that the individuals responsible must be held to account.

‘It does stretch credulity that all banks made the same mistakes at same time, all in their own interest. I don’t buy that.’

He said fines and levies on banks would just be passed on to customers and warned: ‘We know who will suffer. It won’t be the senior executives – it will be the other mortgage holders.’

Former Bord na Móna boss Eddie Molloy, now a leading management consultant agrees: ‘Unless scrutiny and the sanctions are directed at individual senior managers and board members, the Taoiseach’s intervention will have no long-term impact on the culture that continues to spawn this kind of abhorrent behaviour,’ he wrote in a letter to the Irish Times.

Individuals must be held responsible