Don't let banks take trackers off borrowers – legal group
BANKS should not be allowed to take tracker mortgages off distressed borrowers as part of a debt deal, the legal body Flac has said.
It comes as revelations in the Irish Independent showed that Bank of Ireland has been conducting research to seek ways to get homeowners to give up their trackers.
The Central Bank is proposing changing its rules to allow the removal of trackers to form part of the negotiations on write-offs of mortgage debt.
But the legal rights body Flac (Free Legal Advice Centres) opposes this change, which it said would mean higher interest payments for the banks in the long run.
Flac's Noeline Blackwell and Paul Joyce said that consumers would be the big losers if banks took away their trackers, even where the mortgage holder is getting a debt write-down.
More than half of the mortgages in banks are trackers, which lenders argue are now loss-making for them.
In a submission to the Central Bank on changes to the code of conduct on mortgage arrears, Flac referred to this week's revelations that Bank of Ireland has been carrying out research on ways to get homeowners to give up trackers.
"Clearly, this illustrates the potential value to any mortgage lender of engineering these switches," the submission said.
And Flac said it was its understanding that the bailout troika wanted to ensure that people who are in mortgage arrears get to keep their trackers if they co-operate with their lenders.
The current version of the mortgage arrears code bans banks from moving people who are in arrears off a tracker rate to another type of mortgage.
Trackers are the best value mortgages. A customer with a €200,000 home loan who is currently being charged 2pc interest on a tracker deal would pay an extra €4,800 a year if they switched to a 4.5pc fixed-rate mortgage.
Flac said there was a need for an independent third party to assess if it was advantageous for a debt-distressed borrower to give up a tracker.
"There is a serious danger that a customer in arrears and already under considerable pressure and stress would be coerced into giving up their rate. It is clear that the only scenario where this could possibly be justified is in the event of a write-off," Flac said.
The Irish Mortgage Holders' Organisation also called on the Central Bank to ensure borrowers get professional advice before they give up a tracker.