Posted: November 4th, 2014
The Financial Services Ombudsman has been told by an Appeal Court judge to review an increase in a mortgage interest rate which a Dublin couple is claiming to be unfair.
Kenneth and Donna Millar had originally complained to the Ombudsman that the Danske Bank had increased the interest rate on their six variable rate investment mortgages and on the mortgage on their family home to 4 percent at a time when the Central European Bank´s interest rates were at an all-time low.
The couple argued that, under the terms of their variable rate mortgage, their lender was only entitled to change the interest rate on their mortgages “in line with general market interest rates”. However, when the Millars asked the Danske Bank to review the increase in their mortgage interest rate, they were told that the rates set by the European Central Bank were irrelevant.
With their complaint to the Ombudsman, the Millars – from Portmarnock, County Dublin – included an explanation of how their variable rate mortgages were supposed to operate based on information that had been provided to them at the time the first of the mortgages was taken on with the National Irish Bank in March 2009 prior to its subsequent takeover by Danske Bank.
The literature stated that the interest rate borrowers paid on National Irish Bank variable rate mortgages change in line with any fluctuations in general interest rates. The explanation went on to say: “When interest rates go down your monthly payments do likewise. However, when interest rates rise, your monthly payments will increase too”.
After a review of the increase in mortgage interest rate, the Ombudsman rejected the Millars´ complaint on the grounds that the relevant clause in their finance agreements stated that the bank would alter the rate “in response to market conditions” and not “in line with general market interest rates”. The Ombudsman ruled that this distinction was significant and released Danske Bank from maintaining interest rates in line with those issued by the European Central Bank.
As they were not happy with the review, Kenneth and Donna Millar appealed the Ombudsman´s decision to the High Court, where Mr Justice Gerard Hogan found fault with the decision of the Financial Services Ombudsman. The judge said that text of the clause was ambiguous in the “general factual background against which the contract was entered into” and that the Millars were justified in objecting to the mortgage interest rate increase.
Judge Hogan dismissed the Ombudsman´s original decision and said that the Service should review the increase in the mortgage interest rate once again “in a manner not inconsistent with this judgement”.
The Consequences of Judge Hogan´s Decision for Other Variable Rate Mortgage Holders
Judge Hogan´s instruction to the Ombudsman to review the increase in the mortgage interest rate has implications for approximately 207,000 mortgage holders in Ireland who have variable rate mortgages like the Millar´s – almost 30 percent of the Irish mortgage market – and who now have a precedent against which to challenge a mortgage interest rate increase.
Significantly Mr Justice Gerard Hogan did not rule that Danske Bank had acted unfairly or were in breach of contract, or instruct the Millars´ lender to reveal how the couple was risk-assessed. Furthermore, the Millars have always been up-to-date with the repayments on their seven mortgages, and the verdict in this case means that other variable rate mortgage holders will have to find fault with their mortgage agreement if they want a review of an increase in a mortgage interest rate.
If you are one of the 30 percent of the Irish mortgage market that has a variable rate mortgage, and you would like to know more about reviewing an increase in a mortgage interest rate, please do not hesitate to contact our Legal Advice Centre to speak with an expert on contract law. Although we cannot guarantee a successful conclusion, we will be able to advise you of your rights and how it may be possible to initiate a review of any increase in your mortgage interest rate.
Categories: Compensation News