Mortgage holders lured into dearer loans

BANKS are taking advantage of hard-pressed mortgage holders unable to meet repayments by luring them back into more expensive loans, the Financial Regulator has said.

Lenders are allowing customers to defer or skip repayments if they sign up for fixed-rate mortgages that can be tens of thousands of euro more expensive in the long term.

A variable or tracker mortgage can be up to e1,000 a month cheaper to pay back as a result of a drop in interest rates by the European Central Bank, making fixed rates far more profitable for banks.

The regulator has sought information from all financial institutions to ascertain the extent of the practice.

It sent out a notice yesterday warning all banks “to treat customers fairly when a mortgage holder contacts them to address issues before they become problematic”.

Chairman of the regulator, Jim Farrell, said: “Moving people off tracker mortgages should be a no-no and banks should be called to account.”

Mr Farrell told the Oireachtas Committee on Economic Regulatory Affairs: “Recouping on the loss is one thing but capitalising on a problem is another thing.”

Committee members said banks should be called in to explain, and outline what they are doing to help customers who are having difficulty meeting repayments.

Members also raised concerns about the fees of up to e20,000 charged to customers to move from a fixed rate to a tracker mortgage.

But the regulator said this is a difficulty that may not be possible to resolve without legislation.


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