23 Oct 2017

When banks lie to lenders -- the Irish Tracker Mortgage Scandal

The "largest scam ever perpetrated on customers in the State", was how David Hall of the Irish Mortgage Holders Organisation described the tracker mortgage scandal that broke in Ireland this week.

Ciara Kenny
Ciara Kenny The Irish Times, Ireland
Source: The Irish Times
When banks lie to lenders -- the Irish Tracker Mortgage Scandal - NewsMavens
Townhouses on a residential street. Kenneth Allen/geograph.ie (CC BY-SA 20.)

Why this story matters:

The "largest scam ever perpetrated on customers in the State", was how David Hall of the Irish Mortgage Holders Organisation described the tracker mortgage scandal that broke in Ireland this week.

The Central Bank of Ireland has identified 20,000 mortgage holders across the country who were wrongly removed from their tracker mortgages and were paying higher rates than they were supposed to.

During the Celtic Tiger, lenders in Ireland sold hundreds of thousands of variable interest rate 'tracker' mortgages, which had a low interest rate tied to that offered by the European Central Bank  (typically 0.7-1.2% above the ECB rate). After the financial crash of 2008, banks couldn’t get access to cash at anywhere near these rates and tried to force as many people as possible off the tracker mortgages which were costing them a lot of money.

In the case of some tracker mortgage customers, incorrect interest rates were applied to their accounts. Others were not properly informed by their banks of the consequences of breaking early from a fixed rate or discounted tracker period.

Stories have been emerging this week of the huge financial pressure some homeowners were under as a result, with some claiming they were bullied and lied to by their banks.

Some had to emigrate to find work to service their repayments. Others spoke of relationship breakdowns, mental health problems, or having to live without basic essentials such as food or heat. Some lost their homes after the bank repossessed their property. 

The Irish Mortgage Holders Organisation estimates that the number of affected accounts could be as high as 45,000.

So far the banks have paid out 163 million EUR in redress, but no amount of money can fully compensate those people who have endured a decade of immense financial strain, which could have been avoided.

Details from the story:

  • 20,000: the number of affected tracker mortgage accounts identified so far by the Central Bank
  • 45,000: the estimated number of accounts affected, according to the Irish Mortgage Holders Association
  • 350,000: the number of remaining tracker mortgage accounts in Ireland
  • 163 million EUR: the amount of compensation paid out so far
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