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Struggling families sue bank over mortgage rate

HOMEOWNERS who are refusing to let their bank switch their mortgage repayment terms have taken their case to the High Court.

A total of 74 sets of proceedings have been launched against Irish Life and Permanent TSB after the bank announced last year it was going to switch the mortgages to interest and capital repayments.

Mr Justice Roderick Murphy gave permission for four test cases to be mounted.

The proceedings relate to mortgages taken out over the period from the end of 2004 to 2007 and range from €300,000 to €400,000 each.

All of the homeowners took out the interest-only mortgages at agreed interest rates.

Pension

They signed off on an agreement to pay interest for the full term of the mortgage and to pay off the capital at the end of the agreed term or when the property was sold, whichever happened first.

The High Court heard that some of those who have taken the proceedings are in financial difficulties and some had taken out the mortgages to purchase property as a pension.

Mr Justice Murphy ruled that two cases already at an advanced stage of preparation, and which deal with homeowners who got a mortgage directly from the bank and through independent brokers, would go ahead.

Counsel for the homeowners, Ross Maguire, will now ask the High Court to decide on a preliminary issue relating to a provision of the Consumer Credit Act, where the terms of a loan have to be set out on the front schedule of the housing loan documents.

And counsel for Permanent TSB, Paul Gallagher, said that the bank originally thought there were only two cases to come before the courts, but "others appeared out of the woodwork."

Costs

He asked that the court only allow two cases to go ahead to avoid both sides incurring large costs.

Separately, a number of mortgage holders at EBS have been incorrectly categorised as being in arrears - when the clients were actually speeding up the payments to reduce the overall cost.

The mortgage lender has blamed an error in its system for the mistake.

In at least two cases, clients were asked to fill out a detailed standard financial statement which sets out their income and monthly outgoings.

The homeowners were also told that they would be entered into the mortgage arrears resolution process (MARP) - the process that the Central Bank demands that lenders follow when a person is in arrears, or about to fall behind on their payments.

But none of these homeowners were behind on their repayments.

EBS, which is part of AIB, said it has now fixed the problem.

hnews@herald.ie


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