Watchdog alert on tracker home loans
THE Financial Regulator has been called on to carry out a probe of mortgage lenders to make sure they are not attempting to encourage homeowners to give up tracker mortgages.
Chairman of the Consumers' Association of Ireland James Doorley said lenders were under a statutory obligation, under the regulator's consumer protection code, to act in the best interests of their customers.
This meant that any attempt to incentivise customers to give up their tracker would be a breach of the statutory code.
Lenders are attempting to get people to give up their trackers when they get into arrears and need to restructure their mortgage.
There has also been concern expressed about an offer from Halifax/Bank of Scotland (Ireland) to its mortgage customers of up to €1,150 in cash if they want to switch to another provider to avail of a top-up on their mortgage.
A spokeswoman for the Financial Regulator stressed yesterday that lenders were required to act honestly and in the best interests of customers.
"Our firm view is that no bank should offer incentives for tracker mortgage customers to switch to less favourable options," the spokeswoman for the regulator said.
Mortgage broker Karl Deeter, of Irish Mortgage Brokers, said most tracker contracts were based on the mortgage being a set percentage or lower of the value of the house. However, most house values have collapsed by 30pc or more, meaning many loan-to-value ratios have moved out of line with the original tracker deal. Mr Deeter said most lenders based their tracker offers on the loan-to-value ratios.
These lenders could seek to renegotiate the mortgage rate to reflect the higher value of the loan relative to the value of the home, he said. Lenders could ask consumers to pay down money on the mortgage to bring the loan to value back in line.
with the original agreement, or force people to switch to a variable rate loan, Mr Deeter added.
For example, National Irish Bank offered those who were switching to it a tracker rate of the ECB rate plus 0.5pc if the mortgage was worth 50pc or less than the value of the home.
The regulator said: "Our firm view is that no bank should offer incentives for tracker mortgage customers to switch to less favourable options."
A spokesman for the Irish Banking Federation said it was its information that members were not trying to exploit loopholes in tracker contracts to push through rate rises.
Meanwhile, Bank of Scotland (Ireland) insisted it was not attempting to provide financial incentives for mortgage customers to switch their tracker mortgages to another lender.
The bank said the Financial Regulator had made it clear that no bank should offer incentives for tracker mortgages to switch to other lenders for less favourable options.