Bank wanted €15k a month – then told us to sell when interest-only loan ended
How lenders treat those who took out interest-only home loans may be the next great scandal
INTEREST-ONLY home loans sounded like a great idea. You pay less because you are just paying off the interest. But when the interest-only period ends, you usually haven’t paid off the capital, so the bank effectively owns your house. What happens then? One retired couple in their seventies were horrified to find out exactly what can happen.
Their bank started demanding €6,000 a month in repayments – later upped to €15,000 – then told them to sell their home.
‘As we have a modest mortgage and home, our payments (had) varied from €141 to €199 per month. We are both on the old-age pension and have no other means of support,’ the couple said.
The interest-only deal on the mortgage came to an end in early 2019, said the couple, who wish to be known only as J&A.
‘They amended the terms of our mortgage, giving us what we thought was a one-year, 11-month extension.
‘That offer was made to us in March 2019 and totalled 19 pages. We thought that the extension was to keep us in our home.
‘However, page 13 showed that we committed to put our home on the market and to prove to the lender that it is being actively sold. While we have equity in the property, there would not be enough to allow us remain in Dublin,’ they said.
‘In May 2019 we received a letter from the bank informing us that our monthly payment was going to be in excess of €6,000 per month.’
This couple sought help from financial advisor Ben Hoey of Quartech. He is a former senior banker who now helps people with distressed loans.
He was so outraged by the complaints about banks he received through his work that he set up Misselling.ie to tackle what he believes is the next big financial scandal.
The couple provide one of many harrowing testimonials that are reproduced on the website. While a happy resolution may still be some way off, J&A have at least been given some breathing space.
‘Quartech reviewed our case and showed how our mortgage may have been mis-sold at origination.
‘They then filed a complaint with the bank on our behalf and this was rejected by the bank,’ they said.
‘After increasing the amount required to €15,000 per month, the bank has now conceded to granting us a five-year extension at our original affordable amount, thanks to Quartech’s interventions. Quartech has now filed our complaint with the Financial Services and Pensions Ombudsman seeking a long-term solution and compensation.’
So just when you thought the latest banking scandal was over, is there another one heading down the tracks?
Mr Hoey thinks so. ‘The numbers are hard to quantify, however I estimate there could be circa 150,000 mis-sold mortgages in Ireland,’ he said.
Victims of mis-sold mortgages can seek redress through the complaints process of the Irish Financial Services and Pensions Ombudsman.
Key to the issue is how the Ombudsman will treat these cases.
However, the concept of mis-selling may be difficult to prove and will certainly be fought every step of the way by banks still reeling from massive payouts made over the tracker mortgage scandal.
One type of problem loan is interest-only mortgages. Between 2005
2008, around 379,000 mortgages were approved by Irish banks, of which 47,000 were interestonly, said Mr Hoey.
He said he has ‘no problem with interest-only loans’ unless they involve the family home and there’s no plan in place to repay the capital. However, those issues are common.
‘A substantial number of these mortgages are in arrears or restructures while a significant number of the interest-only have yet to come to the end of their term,’ he warns.
Another case he is working on involves a couple who were encouraged to file documents outlining ‘aspirational’ future income rather than real income.
‘They were lent far too much money,’ he said,
The lending splurge of the noughties was done, not in the interest of borrowers, but to boost the balance sheets of banks and ‘reward everyone involved in the sale with bonuses’.
This contravenes even the vague regulatory guidelines for banks at the time, Hoey contends, providing grounds for compensation, although judging by previous scandals, banks will fight every step of the way.