Wednesday 12 December 2018

'AIB's failure is costing us €500 a month' - Fresh hope for families in tracker loans nightmare

  • Fresh hope for families in tracker loans nightmare
  • Hopes scandal will end this year after Government's threat to banks
  • Dad-of-two says he is paying €500 extra a month
  • Woman says she began to lose her hair with the stress
Gareth Murphy Picture: Frank McGrath
Gareth Murphy Picture: Frank McGrath

Charlie Weston and John Downing

A married father of two young boys has told of how he is unable to get AIB to agree to put him on the right tracker rate.

Garreth Murphy reckons the failure of AIB to put him on the tracker rate he says he is entitled to is costing him €500 a month.

He bought an apartment in 2007, but has since moved out and is renting a larger home for his family.

"I moved out in 2011 and we are renting. The failure of AIB to offer me the correct tracker rate is costing us €500 a month. We can't afford to save for a deposit for a house," he says.

Mr Murphy, who is a lawyer in a Dublin software company, tells his story as families have been given fresh hope that their tracker nightmare will end this year, after the Government threatened to hit banks with massive tax bills if they do not rectify the mess.

Mr Murphy bought an apartment in south Dublin in 2005 and re-mortgaged in 2007 with a top-up additional mortgage to buy out his girlfriend after their relationship broke up.

Both loans were on a tracker interest rate set at a 1.1pc margin over the European Central Bank (ECB) rate.

He opted to go on a tracker rate on one loan and a fixed rate for four months on the other loan, after which (in September 2007) he was offered a 1.1pc tracker margin, but he opted to fix for three years.

After the drop in the ECB rate following the crash, he broke out of the fixed rate in 2008 - but was told by the bank he was not entitled to go to the low-margin tracker.

By 2011 AIB's variable rates had reached 4.75pc, so he fixed again for three years.

When this ended in 2014, AIB said he could go back to a tracker, but at a margin of 4.91pc over the ECB rate.

He wrote to the bank in March last year when he heard that AIB was setting aside €190m to deal with tracker cases.

But the bank would not put him on a tracker at a 1.1pc margin. He appealed to the Central Bank.

He is now hoping that the Central Bank can force the lender to put him on his good value tracker, so he and his family can get the funds together to buy a home.

Another tracker mortgage scandal victim, by the name of Eileen, told RTE Radio One's Morning Ireland how she began to lose her hair from the stress caused.

"Our mortgage was recently put down to €1,650 but we're still paying €800 more than we should," Eileen told the programme.

"I remember getting very depressed and upset.

"I don't know if you've ever felt like you've been punched int he stomach, that's what I felt like when I was told... I just thought how could they take me off my tracker? I had hair loss, alopecia. I tended to push my feelings down and look at the best side of things, but my worry was showing physically."

'Scandalous'

Taoiseach Leo Varadkar has described the behaviour of the banks was "scandalous" after it emerged that lenders are actively frustrating the efforts of regulators.

The Government is devising a plan to hit banks with steep tax increases, after the Central Bank watchdog was accused of failing to use all its powers to resolve the trackers scandal.

Mr Varadkar warned that the Government is losing patience with the banks, who must restore the low-cost mortgages to those who should never have been deprived of them.

If the Government does not see results before the year ends, it will provide the Central Bank with enhanced powers or will increase taxes on the banks.

At least 13,000 borrowers were forced on to higher interest rates after their banks refused them their right to a low-cost tracker.

But at the moment, banks like AIB, Bank of Ireland and Permanent TSB will not have to pay any tax on profits for decades to come because they are sitting on multi-billion euro "tax losses".

There was previously a cap that restricted their use of "deferred tax assets" to just 50pc of their corporation tax bill, meaning the other 50pc would still have to be paid every year.

The policy was changed in 2013 when the cap was scrapped in its entirety. In one stroke then-finance minister Michael Noonan gave banks the ability to completely offset all corporation taxes.

Reversing this move is within the Government's power and would prove hugely costly as three banks have a combined €4.45bn in deferred tax losses. Some €2.2bn of this could no longer be used to offset against their tax bills if there is a return to the system in place before 2013.

Mr Varadkar said: "It's very much in the interest of the banks, their shareholders and staff to fix this problem, and fix it quickly."

Finance Minister Paschal Donohoe will call in the heads of the main banks on the trackers issue next week.

The minister is also meeting with the Central Bank to see if it has all the powers it needs to deal with the scandal.

Governor of the Central Bank Philip Lane is due before the Oireachtas committee on the matter today.

Mr Varadkar was responding to a new progress report from the Central Bank, as part of its efforts to get 15 lenders to review their mortgage books.

The report found lenders are refusing to acknowledge large numbers of people that regulators reckon should never have lost a tracker.

Banks are also making "unacceptably low" offers of compensation in cases where they do agree a tracker should be returned.

They are putting some customers back on trackers, but on margins so high they might as well be on a high-cost variable rate.

It has also been revealed that up to 100 families lost homes because of banks' failures.

Labour leader Brendan Howlin said the Central Bank had been investigating this issue for two years, but the delays were unacceptable.

He said people had suffered financial loss and great human suffering, and called on the Central Bank to name the two banks that had behaved especially badly.

Chairman of the Oireachtas Finance Committee John McGuinness said politicians were open to strengthening the regulators' powers, but it was not using all of the sanctions at its disposal at the moment.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business