Customers avoid large penalties after glitch at bank

PERMANENT TSB mistakenly allowed customers to switch from expensive fixed-rate mortgages to cheaper variable rates without charging a large breakage penalty.

The lender has temporarily suspended the switching facility while it corrects the glitch in its system that led to the error.

With interest rates falling, many borrowers who locked into high fixed-rate mortgages have sought to break the terms of their loans in order to take advantage of cheaper variable rates. Banks typically charge customers a penalty of between three and six months’ interest to do this, and breakage fees of €10,000 or more would not be unusual.

However, due to an administrative error, Permanent TSB only charged customers a “token amount” for breaking fixed rates, the lender’s spokesman said. “There was a fee, but it was a nominal fee being applied when it should have been a more significant fee,” he said.

The wrong formula for calculating the penalty had been entered on to the lender’s system, he explained.

Permanent TSB customers are currently unable to switch away from fixed-rate mortgages. The facility will be reintroduced in the coming weeks, once it has been repriced.

“We are putting in place a proper formula to identify the correct fee,” the spokesman said.

Customers who only paid a nominal breakage fee before the mistake was discovered will not be charged any extra, and any breakage quotes provided by the lender will be honoured, he confirmed. “There are others who made inquiries but weren’t given a quote and they will be given the correct quote when the facility is back,” he added.

According to one mortgage broker, in one week alone Permanent TSB received 850 requests from fixed-rate customers who wished to switch to cheaper mortgages.

However, Permanent TSB’s spokesman denied that there was a surge in requests.

“As ECB rates have been reducing, there’s been a pick-up in people looking to switch out of fixed rates anyway, but there was nothing very significant about the numbers,” he said.

“There was no surge in numbers. It was in line with the pattern you’d expect when the ECB is reducing [rates].”