A mortgage is a contract between a customer and a bank; the bank lends the borrower money and the borrower repays the loan each month together with interest until the loan is repaid. A bank’s interest rate determines its profit on the loan. In the main, banks make significant profits on their mortgages.A tracker interest rate comprises of the European Central Bank rate plus the bank’s margin on top of it.
On the 10th October 2008, AIB announced that it was withdrawing tracker mortgage rates to all new mortgage applicants. Customers who took our their AIB mortgage before that date, and who had an entitlement in their contract to be offered a tracker rate at a later date were not supposed to be affected by AIB’s decision to withdraw tracker rates.
However, in many cases, AIB withdrew tracker rates for pre-October 2008 customers eventhough those customers were contractually entitled to be offered a tracker rateat a later date. As part of their Redress and Compensation Scheme, AIB have admitted their ‘failure’ in that they withdrew tracker rates for those customers. Therefore, they breachedmany customers’ mortgage agreements / mortgage contracts.
In their Redress and compensation letters, they say thatdespite their ‘failure’ customers have suffered no loss as had they been offered a tracker rate by AIB (between October 2008 – December 2013), AIB estimate that the tracker ratewould have averaged in or about 7.9% (AIB’s tracker margin of 6.9% + ECB at 1%).
Despite AIB maintaining that their customers suffered no loss, they offered to pay customers compensation in the sum of €1,000 for their ‘failure’ together with €615 towards professional legal advice. Thirdly and most crucially, AIB offer customers affected the option of moving onto their current ‘prevailing tracker interest rate’ which they say is 3.32% + ECB. This interest rate is higher than nearly all AIB’s variable and fixed rates.
AIB do not provide any documentation to corroborate the 7.9% or 3.32% + ECB which they say are the correct tracker rates. Fianna Fáil finance spokesman Michael McGrath has said that a‘7.9% tracker mortgage rate never existed; it has been manufactured to enable AIB to reach the conclusion that these customers suffered no loss’. He also went on to say that ‘the 7.9% rate is a concoction and it needs to be vigorously challenged by the Central Bank’.
In our opinion,AIB’s mortgage contractsentitle customersto a lower tracker margin in some cases. There is also a strong argument that as AIB unlawfully withdrew tracker rates, they should now afford their customers their last available tracker rate (1.5% + ECB) before they withdrew same.
We believe so strongly in this case, that we are taking a test case to the High Court against AIB seeking Orders from the Court that our clients:
- Were entitled to a tracker margin of 1.5% + ECB when their fixed rate expired in 2011.
- Are now entitled to this rate of 1.5% + ECB until the end of their mortgage.
- Compensation for every mortgage repayment made over and about this rate.
If you have received the below letter of Redress and Compensationor a similar letter from AIB, please contact our Niall Kiernan on email@example.com or 01 872 5255.
2. Questions & Answers
- We accepted AIB’s offer of compensation and their ‘prevailing tracker interest rate’. Is there any legal remedy open to us at this stage?
- Yes.Regardless of whether or notyou accepted the compensation offered and ‘prevailing tracker interest rate’, you can still pursue AIB for the correct tracker margin and additional compensation.
- We received a letter from AIB advising that they incorrectly have our mortgage on the higher rate and have overcharged us. However, they will not move our mortgage to the lower tracker rate straight away unless we complete and return the Mortgage Instruction Form and accept the compensation offered. Are they allowed to do this?
- No. Regardless of whether or not you want to accept the compensation, AIB should immediately repay any arrears over charged and move your mortgage to the correct tracker rate. You should consult with your solicitor and seek advice from him or her as soon as possible.
- Q. If I want to review myown mortgage account, what should I do?
Step 1– Request your file from AIB Bank using the Data Access Request form. Click here to download a copy Data Access Request Form. You should receive a copy of your file within 30 days.
Step 2– Arrange a consultation to meet with a specialist solicitor together with your mortgage file.