Bank of Ireland forced to put customers back on trackers
BANK of Ireland has been forced to put more than 2,000 customers back on tracker mortgages and compensate them, the Irish Independent has learnt.
The homeowners had opted to move from trackers to fixed rates, but the bank had failed to observe Central Bank rules about the need to warn the customers of the cost implications of giving up a tracker.
Those who completed their fixed-rate period were put on to a variable interest rate -- but they would have been very unlikely to change had they known the cost difference between a tracker and variable rate. Tracker mortgages are regarded as great value because they are set at very low levels and can only rise when the Europe Central Bank (ECB) raises its main rate.
Some mortgage holders have trackers set as low as 0.5pc above the ECB rate, with most set at 1.1pc above the ECB rate.
Now it has emerged that a review by the Central Bank found that 2,096 mortgage holders at Bank of Ireland and its mortgage subsidiary ICS were not given enough information by the bank about the cost of giving up their trackers when they sought to lock in to a fixed rate.
Compensation of up to €2,000 per customer will now be paid to those who switched from a tracker to a fixed rate and the customers will be able to return to their tracker rates.
One customer explained on askaboutmoney.com that he had a tracker set at 0.95pc above the ECB rate. This means he was paying an interest rate of 1.95pc.
The homeowner fixed for three years and at the end of this should have been allowed to return to the tracker. Instead the bank put him on a standard variable rate of 2.7pc.
The difference between the two rates amounts to €40 a month on each €100,000 borrowed.
A spokeswoman for Bank of Ireland confirmed the mistake had been uncovered following a review by the Central Bank.
"The review identified 2,096 customers to whom the bank has agreed to offer the tracker rate as specified in their original mortgage loan documentation," she said.
The Central Bank has strict rules requiring lenders to set out in detail and in writing to customers the exact cost of giving up a tracker.
Questioned yesterday, a spokeswoman for the Central Bank said it had been engaging with Bank of Ireland and ICS in the past months on the matter.
"As a result, Bank of Ireland/ICS is currently contacting 2,096 customers who will be offered the tracker rate set out in their original loan documentation and issuing payments, where applicable, to reflect the difference in rates.
"Customers who were on a tracker rate and who subsequently moved to a fixed rate which has not yet expired will be offered their original tracker rate at the end of this fixed- rate period."