Tracker Mortgages which are featuring in the media in recent weeks, are a type of mortgage whereby the interest rate charged by the bank for the mortgage follows or ‘tracks’ another interest rate on the market, such as the European Central Bank’s interest rate.
At the time of the global financial crisis the European Central Bank’s interest rate dropped significantly, at one point dropping as low as 0% interest. As a result of this, tracker mortgages were yielding significantly reduced profits for the banks than any other type of mortgage.
The global financial crisis rumbled on, the banks’ profits on tracker mortgages became significantly reduced and many mortgage holders found themselves under considerable financial strain. On foot of this, an increasing trend emerged whereby banks were enticing their customers to depart from their tracker mortgage.
Customers were being encouraged by their bank to move off their tracker mortgage to another type of mortgage. Customers were being assured by their bank that switching for example to a fixed rate mortgage would offer stability over repayments in a time of financial hardship.
Customers were also being enticed to move off their tracker mortgage and commence a fixed rate mortgage for a planned period of time. Customers who had switched to a fixed rate mortgage for a planned period of time expected that when the planned period of time passed they would resume repaying the original tracker mortgage rate. What actually transpired however, was that customers were being put back on a tracker mortgage but the bank was applying a higher interest rate than the original tracker rate that the customer had previously agreed to.
As a result of these practices, customers began to feel that they had been duped by the banks into repaying more interest than they had initially agreed to. Many customers struggled to make their mortgage repayments at these increased rates. Some customers had their homes repossessed and many more customers lived in constant fear that their home would be repossessed.
The Central Bank is currently undertaking an Examination of Tracker Mortgages. As part of this examination banks are endeavouring to identify their customers who were sold a tracker mortgage and inform the customer that the mortgage will be the subject of a full review.
The bank should immediately stop charging the customer the incorrect tracker rate if the wrong interest rate was applied and stop any adverse consequences (e.g. home repossession) as soon as possible. The bank should conduct a full review of the customer's tracker mortgage, examine the terms and conditions of the mortgage agreement entered into between the customer and the bank, as well as examining communications with the customer in relation to the mortgage.
Following a full review, the bank should inform the customer of the precise nature of any error and the correct tracker rate that should be applied. Where the correct tracker rate had not been applied to a mortgage in accordance with the banks’ contractual or regulatory requirements the customer should be provided with redress and compensation.
If a customer was wrongfully placed on an incorrect tracker rate they would be entitled to redress in the form of (1) the bank rectifying the tracker interest rate i.e. bringing the customer back to the original tracker rate that was previously agreed to and (2) the bank refunding the customer the amount of money they overpaid by.
Thereafter the customer would be entitled to compensation to return them to the position they would have been in had the correct tracker rate been applied. This compensation should reflect the fact that the amount of money the customer overpaid by was money that the bank wrongly took from them and money that the customer would otherwise have had access to. The compensation should also reflect any stress, suffering and financial damage caused to the customer.
In light of the profound breach of trust by the bank a customer may feel that their Solicitor would be best placed to advise them on whether the redress and compensation being offered by the bank is sufficient to compensate them for their loss, damage, suffering and distress as well as inconvenience.
Contact us at Cantillons Solicitors at +353 (0)21 4275673 or [email protected] if you would like more information.
“In contentious business, a solicitor may not calculate fees or other charges as a percentage or proportion of any award or settlement.”