Tracker mortgage scandal led to 315 homes being repossessed or surrendered

Central Bank says 40,100 borrowers affected, banks pay €683m in refunds and compensation

A total of €683 million in refunds and compensation have been paid out by mortgage lenders, representing 98 per cent of the affected borrowers

A total of €683 million in refunds and compensation have been paid out by mortgage lenders, representing 98 per cent of the affected borrowers

 

The Republic’s tracker mortgage scandal, stretching back more than a decade, has resulted in the loss of 315 homes and buy-to-let properties through repossessions and voluntary surrenders, according to the Central Bank.

In its final report on the matter, published on Tuesday, the Central Bank said the number of borrowers who were either denied their right to cheap mortgages linked to the European Central Bank’s (ECB) main rate or put on the wrong rate entirely had risen to 40,100 by the end of May, up from 39,800 in December.

Refunds

A total of €683 million in refunds and compensation have been paid out by mortgage lenders, representing 98 per cent of the affected borrowers.

The remaining cases are mainly former customers who banks have been unable to locate, with many believed to have moved overseas.

Still, the Central Bank has told lenders to set money aside to cover these cases.

The country’s six main mortgage providers - AIB and its EBS subsidiary, Bank of Ireland, Ulster Bank, Permanent TSB and KBC Bank Ireland - have set aside €1.1 billion of provisions to date to cover redress and compensation, expected regulatory fines, and other costs linked to the State’s biggest financial overcharging fiasco.

The six lenders make up 98 per cent of all impacted customers in the State.

“The scale of lenders’ tracker mortgage failings was industry-wide, causing immense distress and damage to affected customers and their families,” said Derville Rowland, director general of financial conduct at the Central Bank, adding that regulator, which fined Permanent TSB €21 million earlier this year for its tracker failings, is continuing enforcement cases against the other five lenders.

Many of the affected customers moved from tracker mortgages to fix-rate loans for a period between 2006 and 2008 to avoid uncertainty over monthly payments as the ECB was increasing its rates. They were refused their right to return to a tracker loan as banks stopped offering these products during the financial crisis.

The number of private dwelling homes that were deemed to have been lost as a result of the tracker scandal was 99 as of the end of May, up from 71 a little over a year earlier. Identified buy-to-let cases where properties were lost rose to 216 from 142 over the period.

Compensation

An average of €194,000 of refunds and compensation was paid to owner-occupiers who lost their homes. Buy-to-let borrowers who lost their properties received an average of €162,000. It resulted in total of €54.2 million being paid out to these two categories.

“I'm crystal clear that those who need the most sympathetic treatment are those citizens who have gone through the utter trauma of losing a family home,” Minster for Finance Paschal Donohoe told reporters on Tuesday, adding that the Central Bank report “is a searing insight into the misery that was caused to mortgage holders and their families because of the way they were treated by the banks”.

About 1,200 individuals caught up in the wider crisis received more than €100,000 in redress and compensation. However, some 57 per cent received less than €10,000, according to the report, which the Central Bank hopes will draw a line under the issue after it directed the country’s lenders in late 2015 search their loan books for cases of overcharging.

The total of 40,100 tracker cases includes 5,100 Bank of Ireland and about 2,000 Permanent TSB accounts that were dealt with before the Central Bank ordered the examination.

The Central Bank said that its challenging of the banks over the past few years resulted in the banks acknowledging 20,000 of the impacted cases.

To date, 3,300 customers have appealed the compensation they were offered, with more than half of the 1,800 cases that have been adjudicated resulting in borrowers receiving more money. A total of €7 million of additional compensation was awarded in these cases.

About a fifth of affected customers are still within the time period for making appeals if they so wish, the Central Bank said.

“The tracker mortgage scandal represents a shameful chapter in Irish banking which caused great distress and financial damage to many bank customers,” said Brian Hayes, chief executive of the Banking & Payments Federation Ireland (BPFI). “Rebuilding trust and reputation in Ireland’s banking sector is a challenge that the industry fully recognises. We are determined to fix the problems.”