The cost of losing your tracker mortgage

I have a mortgage with Danske Bank. It was originally a tracker mortgage but after fixing it for three years in 2006 I was not offered the option to return to a tracker mortgage. Could you advise me if I have a case to look for compensation for the high interest rates that I have been paying since then?

Kevin

There has been a lot of publicity on banks that have not put people back on tracker mortgages when they are finished their fixed rates. In many cases, they simple failed to clearly inform them of the choice and financial implications. In July, almost 1,400 mortgage holders with Permanent TSB and Springboard Mortgages were to receive compensation after a series of failures related to tracker mortgages and mortgage overpayments were uncovered by the Central Bank. BOI and AIB also had to pay compensation.

Just like Kevin, many of the homeowners had opted to move from trackers to fixed rates, but the banks had failed to outline in letters sent at the end of the fixed period that the customers had the option of going back on the tracker rate. I have not come across any cases with Danske but that does not mean the situation was the same.

I rang Kevin to get more details. He had borrowed €100,000 over a 15-year period on a tracker mortgage in 2005. The bank sent him information the following year offering a three-year fixed rate of 3%. With interest rates looking to increase, he made the decision to take the fixed rate. When the period was up, he went on to a variable rate based on the loan-to-value ratio. It is currently on 4.5%. The tracker rate was 1% over the ECB rate. This is currently at 0.05% – a record low – which means the interest rate would be just 1.05%. The difference is €1,350 a year in higher interest payments. Kevin has around €40,000 of capital to pay back on his mortgage at this stage. The interest difference would have been higher in previous years. I worked out that if this gap had been similar for the last five years, Kevin has potentially paid over €11,000 more in interest, although it is likely to be slightly less as the gap was probable not 3.45% for the entire three years. However, as he has five more years left on the mortgage, he would also pay an additional €3,000 to €4,000 as well. So it is worth trying to get compensation.

The first thing Kevin should do it to dig out his paperwork from the bank. First look at the correspondence around when he made the decision to go on to a fixed interest rate in 2006 and when he came off it in 2009. Does it state that you will not be entitled to go back to your tracker rate at the end of the fixed rate period? The Central Bank has strict rules requiring lenders to set out in detail and in writing to customers the exact cost of giving up a tracker. They also force the banks to warn customers of the cost implications of coming off a tracker to move to a fixed rate or a variable rate.

If these are not clearly stated and the bank did not offer you the option at the end of your fixed rate, then you have a strong case.

Next, dig out the initial loan offer you signed in 2006 when you took out the mortgage. You are looking to see if there is any clauses to going off a tracker rate in the future. If you cannot find the documents, you can always ask the bank to provide them.

They can make difficult reading. It can be good to get the advice of a financial adviser that has some experience in the area, preferable one that has dealt with similar cases to yours. The first step will be writing to the bank to outline your case for compensation and to be reinstated to your tracker mortgage. They have 40 days from when they receive your letter to respond, investigate and resolve the matter. If they do not or you are unhappy with the outcome, you can make a compliant to the Financial Services Ombudsman. The Financial Services Ombudsman is a statutory officer who deals independently with complaints from consumers about their individual dealings with all financial services providers where the issue has not been resolved by the provider.

Therefore, the Ombudsman is the arbiter of unresolved disputes and is impartial. It is a free service to the complainant. Given that the amount of extra interest you paid could be over €14,000, it is worth starting the process. The fact that Danske Bank is leaving the country does not absolve them of their responsibilities to you. CL

In brief

• People who opted for fixed

rates should have been entitled to

go back to tracker mortgage.

• Many have been compensated for this.

• Check the loan correspondence

from the bank.

• Get advise if you do not

fully understand.