Watchdog urged to investigate banks in tracker row

Charlie Weston Personal Finance Editor

FINANCIAL Services Ombudsman Joe Meade has demanded all mortgage lenders be probed to ensure they are honouring agreements allowing people to retain their tracker mortgages.

Mr Meade has demanded the Financial Regulator carry out the probe after he found against a lender that would not allow a couple coming off a fixed-rate mortgage to move back on to a tracker as agreed.

However, the bank is challenging the ombudsman's decision in the High Court, the Irish Independent has learned.

It is understood the couple had initially taken out a tracker. They then locked into a fixed-rate mortgage on the basis that they had an agreement with the lender to go back to the tracker at the end of the fixed period. When they finished the fixed-rate period and requested their lender to put them back on a tracker, this was refused. Mr Meade ordered the bank to give the couple back their tracker.

Trackers offer a guarantee to the borrower that the mortgage rate they pay will always be a set percentage above the European Central Bank rate. Lenders are desperate to take people off trackers because they are losing money on them.

It is understood the couple were on a tracker set at 0.7pc above the ECB rate. This would mean their tracker rate would currently be 1.7pc.

But their lender wanted to put them on to a standard variable rate that was more than twice the tracker rate. The couple have a 30-year mortgage for over €750,000. It is thought that the difference in payments between the tracker rate and the standard variable rate is more than €600 a month.

The ombudsman's findings are expected to have implications for all lenders, many of whom are welshing on such agreements.

Homeowners who are forced to renegotiate their mortgages are also finding they have to give up their trackers.

If the Financial Regulator forces banks to honour previous commitments to allow people to revert to trackers, it will prove costly for lenders.


Mr Meade would not comment on the matter yesterday, but sources indicate he has written to the Financial Regulator asking its officials to check whether other lenders are reneging on agreements to let homeowners revert to trackers.

Mr Meade also found against six lenders over breakage fees for exiting out of fixed-rate home loans. In these cases, the homeowners had been told they could exit their fixed rates without being charged a breakage fee.

The ombudsman has received around 120 complaints from homeowners who have been quoted between €5,000 and €45,000 to break out of fixed-rate mortgages. In the majority of cases he has found that the breakage fees have been calculated correctly.

No spokesperson was available from the Financial Regulator yesterday as its staff were on strike.