AIB to pay 55,000 customers amid fresh tracker mortgage controversy 

AIB said it will write to 55,000 tracker customers to address the pace at which it has passed through rate reductions implemented by the ECB

AIB Chief Executive Officer Colin Hunt.

The Central Bank of Ireland has said it is engaging with AIB after the lender confirmed plans to apologise to more than 50,000 customers amid a fresh controversy regarding its portfolio of tracker mortgages. 

AIB said it will write to 55,000 customers before the end of the month to address the pace at which it has passed through rate reductions implemented by the European Central Bank (ECB). 

It is understood that 35,000 mortgage accounts have been impacted, all of which were previously owned by Ulster Bank before it exited the Irish market.

In January 2023, AIB was cleared to acquire a portfolio of performing tracker mortgages from Ulster Bank worth €5.7bn. AIB previously said it expected to generate about €90m of total income from the portfolio on an annualised basis.

Before the loans were acquired by AIB, tracker mortgage customers saw interest rates updated in response to ECB rates at a significantly faster rate than they are now, prompting some customers to complain about the length of time rate cuts are currently passed through.

AIB, which uses credit servicing firm Mars Capital to administer its former Ulster Bank portfolio, said it will make a once off "goodwill payment" of €75 to affected customers, which will amount to €2.6m in total. 

It added that it will credit customers' mortgage account for any difference in interest paid due to differing approaches from the time their accounts moved to AIB to now. 

A spokesperson for the Central Bank of Ireland said it is aware of the issue and is engaging with AIB, adding that customers should contact AIB directly if they have any queries regarding their mortgage products. 

An AIB spokesperson said: "We will be writing to tracker mortgage customers from the 29th of August whose accounts transferred to AIB from Ulster Bank to explain our approach to how ECB interest rate changes are applied. 

"This approach is the same in both a rate increase and decrease scenario and is in line with the customer’s agreement with us but is different to Ulster Bank’s approach. Customers have not been overcharged. 

"We are sorry we did not communicate this change in approach sooner and to acknowledge this, we are making a once off goodwill payment of €75 and crediting the customer’s mortgage account for any difference in interest paid due to the differing approaches from the time their account moved to AIB to now. 

"Exact details will be communicated in the letter that each customer will receive and no action is required by customers.”

It’s understood that AIB’s approach means that when rates are falling, customers incur a cost compared to their previous arrangement with Ulster Bank. However, this approach remains in line with customers' mortgage agreements. 

In June last year, AIB paid €3.3m in "goodwill payments" to apologise for "teething problems" that affected almost 33,000 former Ulster Bank tracker mortgage customers who had since transferred to AIB.

A year before that, AIB was hit with a record fine of €83.3m for its role in the tracker mortgage scandal, having admitted to 57 separate regulatory breaches.

The fine was separate from the more than €125m that AIB has been required to pay to date in redress, compensation and account balance adjustments to impacted customers, including as part of the Central Bank’s Tracker Mortgage Examination.