Bank appeals ombudsman’s ruling on tracker mortgage

A MORTGAGE lender has asked the High Court to overturn a decision of the Financial Services Ombudsman requiring it to allow a couple to revert to a tracker mortgage for the remainder of their 35-year mortgage.

The ombudsman made the order against Irish Life and Permanent after finding the lender should have made clear, in writing, to the couple they would lose their right to revert to a tracker mortgage if they opted out of their fixed-rate term early.

The couple, who changed from their fixed-rate term to a variable rate in January 2009 after one of them had become unemployed, had complained to the ombudsman that this was not clearly explained to them by Irish Life and Permanent, trading as Permanent TSB.

The bank yesterday argued there were “significant errors” in the ombudsman’s findings and it had erred in finding the bank was in a position of a “fiduciary relationship” with its customer.

The couple had taken out a mortgage for €395,000 in 2007 with the interest rate fixed for the first three years and it was then to revert to a tracker rate following the ECB rates when the fixed-term expired.

In January 2009, they contacted the Lucan branch of Permanent TSB to find out if there was an exit fee for the fixed-rate mortgage. They were told there was “no penalty” and the only rate available to them to switch to would be the variable rate of 4.65%.

The couple, who did not tell the bank of their financial difficulties, went into the bank and switched rates. The bank stated an assistant manager would clearly have told the couple that once they switched, any “price promise” regarding a tracker would be null and void.

Paul Gallagher SC, for the bank, said the ombudsman erred in law in holding the bank was in a fiduciary position with the customer and was entitled under law “to look after its own interest”.

Permanent TSB said the complainants were advised it would bring their tracker to an end and an early letter from the couple to the bank says they were told the tracker would no longer apply.

Paul Anthony McDermott, for the Financial Services Ombudsman, said the customers were clearly confused and had been placed in the position where there was “not a shred of writing to record the fact they are losing this right” to revert to a tracker.

The case continues today.