Today, nearly nine years after the great Irish property bubble first met its pin stories are still emerging of people who at that time, worried about how the higher ECB rates would affect their monthly payments, switched to a short term fixed rate, usually for two or three years. It is estimated that about 10,000 tracker holders switched to temporary fixed rate contracts. Perhaps as many as 4,000 have still not had their trackers reinstated.
About 300,000, or half of all mortgage holders own trackers, that cost them a small premium over whatever the ECB rate happens to be. They were widely sold from around 2003 with the average premium amounting to (circa) 15%
By 2006, however, ECB base rates were rising and by that summer, when the rate hit 2.75%, tracker owners who were paying c1% over that rate were getting nervous. Up to 10,000 began switching to temporary two or three year fixed rates that cost about 2%-2.25%.
It was a good move. Two years later, the ECB rate was 4.25%, though it came down again quickly as the worst of the Lehman Bros collapse began to impact in the Eurozone. By May 2009, just as many of those fixed rate contracts were ending, the ECB rate had dropped to just 1%.
By then the Irish banks were entering a full-blown solvency crisis (which eventually led to the infamous bank guarantee) and the last thing they wanted was for 10,000 people to return to their old, incredibly cheaper trackers.
Some customers shouted foul when they discovered they’d been put onto standard variable rates of 5% or 6% instead of their old tracker rates. The lucky ones – who got through to their banks and could produce their unequivocal original loan agreements – succeeded in getting their trackers back.
Too many others however, got caught up in the chaotic maelstrom of the bank crisis and, according to reports by the Financial Services Ombudsman (FSO) and Central Bank (CB) the banks intentionally prevaricated, disseminated and stonewalled their customers. Too many – who were in financial trouble themselves – often gave up in despair of ever getting their cheap rates back.
It was only in 2011 after Central Bank intervention, that 2,000 Bank of Ireland customers were restored to their lost trackers. Many new complaints were submitted to the FSO, though with mixed success, claim financial advisers who have represented hundreds of lost tracker clients.
They say the official complaints process has been extremely cumbersome and settlements have been inconsistent. They say the banks continued their delaying tactics, often in the hope of invoking the six year statute of limitations rule for taking cases to the Ombudsman.
Financial advisers like Padraic Kissane of Kissane Financial Services in Dublin and Bob Quinn of The Money Advisers in Naas, Co Kildare both report however, that the FSO is willing to mediate cases that overshoot the 6 year deadline if delaying tactics have being used by the banks. They also report that Ulster Bank and Bank of Ireland are now willing to settle cases outside the FSO.
Kissane claims a 74% success rate with the FSO and represents a large number of the 2,000 PTSB customers who lost their trackers and whose cases are pending. The PTSB’s actions in delaying settlements – which involve threats to go to the Supreme Court to overrule a High Court order to reinstate lost trackers – is also being investigated by the Central Bank. (In May Kissane submitted a 50 page report to the CB.)
The advisers believe there could be as many as 4,000 remaining lost tracker cases and they involve not just those who are now on high variable rates but are still with their original lender, but also those, like one MoneyTimes reader who, unable to get her tracker back in late 2008, moved to another bank where she was given a lower cost variable rate.
After finally complaining to the FSO in 2011, she was finally awarded €25,000 for all the extra interest she has paid since 2008, but the Ombudsman did not order her old bank to take her back and restore her tracker.
As she is paying 3.9% interest instead of 0.9% (the tracker rate) this will cost her over €100,000 more interest for the duration of her loan. (Where a remaining balance is, say €100,000 that’s the difference between paying €390 a month interest and €90 interest.)
Anyone who thinks they may be one of the c4,000 people who still haven’t had their old tracker restored after switching briefly to a fixed rate around 2006, should contract a good, fee-based adviser with a track record in pursuing these cases. Most charge for their time and take a share of any financial settlement.
Given the potentially huge amount of savings involved, that will be money well spent.