What is the tracker scandal about?
In very simple terms, it has at its core a fierce determination on the part of almost all the mortgage lenders who have operated in the Republic over the last 20 years to force as many people as they possibly could off loss-making tracker mortgages in the post-crash period.
I know, I know, I’m a bit like that gombeen on the bus in the ad all those years ago but what is a tracker again?
A mortgage rate tied to the rates offered by the European Central Bank (ECB). Typically during the boom years, tracker rates would have been somewhere between 0.7 and 1.2 per cent above the ECB rate.
That sounds grand, why would banks want to force people off them?
As always it is best to follow the money. In the post-crash period borrowing became extremely costly for Irish banks. They could not get their hands on cash at rates anywhere close to the rates they had committed to offering all tracker holder for the lifetime of their mortgages. That meant the every one of the hundreds of thousands of tracker loans they had given out were actually costing them money.
Right, and whose fault was that?
Oh, it was entirely the banks’ fault. They were the ones who had over-extended themselves with lending practices which could most kindly be described as loose. And they were largely to blame for the crash which cost the Irish tax payer - and Irish tax payers yet to be born - billions of euro. On every single level the banks were to blame.
So, obviously they accepted that it was their fault, apologised and took the financial hit on the chin?
They did not. In fact the banks all did almost everything they could to get people off tracker mortgages, quite often using methods which were at their kindest dubious.
What kind of money are we talking about here?
Given that the official ECB rate is just 0.05 per cent, a person on a tracker is paying an interest rate of between 0.8 per cent and 1.3 per cent on their home loan. Typical variable rates, meanwhile, hover between 3 per cent and over 4 per cent.
If someone has a 25-year, €200,000 tracker mortgage and is paying 1 per cent over the ECB rate they pay around €750 a month. A variable rate mortgage holder owing the same money over the same term will pay around €1,110 a month.
If someone was robbed of their tracker in 2008 and only found out about it last year they may have ended up paying €33,600 more than they should have. Over the course of a mortgage you could be looking at overpayments of more than €80,000.
That’s massive. So when exactly did all this start?
For the thousands of people caught up in it, it started as long ago as 10 years ago. That is when the banks realised they had not done their sums and when it dawned on them that trackers may not have been so clever.
If the banks were up to no good why did the Financial Services Ombudsman not stop them?
Why indeed. Question marks hang over the role played by the FSO. Many people took cases to it and to arbitration committees and lost. It is probably a coincidence that the banks at the centre of the story had a voice on those committees.
Oh, right. So when did the scandal come to light?
It only came to light very slowly. For years up until 2015 there were murmurings that banks were forcing people off trackers for the flimisiest of reasons but it was not until the summer of 2015 that the story reached a climax in courts when PTSB lost a case taken by two couples who had claimed their mortgage accounts had been mismanaged by the bank. After that it emerged that Permanent TSB and its subsidiary Springboard Mortgages had mismanaged the accounts of almost 1,400 mortgage customers with the result that some lost their homes.
What happened then?
The case prompted an enforcement investigation by the Central Bank which identified “significant failures” by both PTSB and its subsidiary company, connected to tracker mortgage options and rates. Among the issues identified by the investigation was PTSB’s failure to inform certain customers of the consequences of their decisions to break early from a fixed rate or discounted tracker period.
What were the consequences of breaking out of a fixed rate?
Well one of the consequences of breaking early was that some lost their contractual right to be offered a tracker rate when their fixed rate or discounted tracker period would have ended. But the bank did not tell people that. It also failed to inform other customers of their right to be offered a tracker rate at the end of any fixed rate period. And it the case of Springboard’s impacted customers, the failure arose from the application of incorrect interest rates to mortgage accounts.
And that was that?
No. As a result of the PTSB revelations, the Central Bank looked into the practices at other banks. A preliminary investigation later in 2015 led it to believe the problem was more widespread than initially thought and in October 2015 it wrote to all lenders notifying them of its intention to conduct a “broader examination of tracker mortgage-related issues covering ... transparency of communications with and contractual rights of tracker mortgage borrowers”
And what happened then?
The scandal grew and grew. Last December the Central Bank disclosed that “at least” 8,200 homeowners had been improperly denied a tracker mortgage by their lender and said those affected in the scandal could be as high as 15,000. All the big lenders were caught up in the scandal?
15,000? Was the number actually that high?
It was actually higher. As many as 20,000 homeowners have been potentially been caught up in the scandal.
Why do we not know the number for sure?
Because the banks have been slowly - critics say far too slowly - unearthing more and more victims.
Victims? That is a bit strong, surely. All that happened was some people paid over the odds on their loans for a few years?
That is not all that happened. As a result of the banks’ negligence - wilful or otherwise - people were unnecessarily put under huge financial pressure. They were lied to by their banks, they were bullied. Relationships will have broken down, people will have fallen ill - physically and mentally - childhoods will have been ruined and people will have gone without many of life’s essentials - food, heat, light, education - just to keep on top of payments that were far higher than they needed to be.
And remember the ones who paid over the odds but managed to hang on to their home despite all the stress and strain are the lucky ones. The ones most badly hit by the scandal are those who could not afford to paying the (higher than necessary) mortgage repayments. People lost their homes. This is a big, big scandal and one which should have been utterly avoidable.
The impact of the scandal on people was laid bare in heartbreaking details before the Oireachtas Finance committee on Thursday morning. Four homeowners who were wrongly taken off valuable tracker mortgages by Permanent TSB and Ulster Bank and forced to pay tens of thousands of euro more in repayment than necessary told of the huge impact the ongoing struggle had on their health and they spoke of a lost decade during which they were robbed of their financial independence and bullied by bankers.
So, obviously after it all came to light the banks leapt into action and gave people refunds and substantial compensation?
No. The banks are only very slowly moving to make amends for their failures.
Where are we now?
The banks have yet to deal satisfactorily with all the people whose lives they so badly affected. And it will be well into next year before they do so which means that for many of the impacted they will have endured a lost decade and endless torment at the hands of banks who used to - and still do - claim that they care deeply about their customers.
