Friday 19 January 2018

Families overdrawn in AIB mortgage blunder

A mortgage blunder by AIB has left thousands of families out of pocket, with some ending up overdrawn.
A mortgage blunder by AIB has left thousands of families out of pocket, with some ending up overdrawn.

Charlie Weston Personal Finance Editor

A MAJOR mortgage blunder by AIB has left thousands of families out of pocket, with some ending up overdrawn.

And the bank is refusing to immediately rectify its mistake in failing to apply mortgage interest relief to repayments. Instead, the State-owned bank is insisting on repaying the money over the remainder of the year. The error is costing families up to €375 each.

The revelation comes as banks hold out against pressure to end the 'mortgage apartheid' that sees people on variable rates paying multiples of the costs of tracker mortgages.

These are up to €6,000 a year more expensive than the cost of repaying a tracker.

It takes a family almost three months to earn enough to meet these extra costs.

Now it has emerged that thousands of AIB mortgage holders did not get the tax relief on their home loans they were entitled to last month.

The mortgage interest relief is worth up to €375 a month on repayments.

The mess-up has left some overdrawn, with direct debits returned unpaid. This could see the customers facing steep charges.

Revenue blamed the State-owned bank, insisting it transferred the funds to it on time. AIB would not say how many people are impacted by the mortgage error, but it is understood to involve thousands of mortgage holders.

A Revenue spokesman said its offices had received a number of complaints, but all queries were referred back to AIB.

Despite being no longer available, some 350,000 mortgage accounts are eligible for mortgage tax relief across all the banks.

Those who bought in the bubble years - between 2004 and 2008 - were given a higher level of tax relief soon after the Government came to power.

Mortgage tax relief is paid automatically by Revenue to the bank and is normally used to reduce the overall monthly amount owed on a mortgage.

The AIB blunder affects people whose mortgage payment goes through on the last day of each month.

One affected customer said he ended up in the red on his current account and has now had direct debits returned unpaid. His mortgage tax relief is €260 a month. "I went outside my overdraft limit because of this, and will now incur fees. I am now facing having to pay a €12 fee for each direct debit that goes unpaid," he said.

"This happened last summer as well. It seems outrageous that something like this can keep happening." He is annoyed that AIB is insisting on spreading the refunded relief over the rest of the year, instead of paying it in full now.

It appears that a glitch in AIB's mortgage IT system led to the customers missing out.

To get mortgage tax relief the previous month's mortgage must have been paid.

This is on foot of recent changes to avoid the situation where people benefit from tax relief even though they are not paying their mortgage.

The last day of February fell on a Saturday. As this is not a working day, AIB's system did not process mortgage payments until the next working day, which fell in March.

This meant the system assumed no mortgage payment was made in February, so no tax relief was credited to mortgage accounts. An AIB spokeswoman said it would repay the money over the next nine months.

"We understand that this may have temporarily inconvenienced some customers and in such circumstances, we advise they contact their local AIB branch who will support them."

Revenue said it sent its mortgage tax relief file to AIB in the middle of the month as usual.

"Following this, it is a matter for the lender to apply TRS (tax relief at source) credits to the individual accounts."

Mortgage expert Karl Deeter said it was unacceptable for the bank not to refund the money immediately.

"If you owed the banks money and spread the payment out over nine months there would be legal threats, penalties and interest. But when it's the other way around, they blame their 'systems' and you can do nothing about it."

Irish Independent

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