AIB says warning of sudden jump in repayments was incorrect, pledges no big change for borrowers

AIB has said customers will not face higher than expected increases in their mortgage repayments in the coming months, despite the bank writing to some borrowers warning of just such a move.

The lender apologised to a group of tracker mortgage customers who were recently notified by letter of a sharper than expected increase in their monthly repayments from October due to an apparent previous error.

On Friday, though, the bank said that letter had been wrong and those larger repayment increases would not take place.

“A letter issued after the July ECB rate increase [resulted] in customers being notified of an incorrect monthly payment change scheduled to take effect in October,” AIB said in an emailed statement. “Customers will not face repayments greater than they had originally expected following the ECB increase,” it said.

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Customers “do not need to take any action. We will issue revised letters with corrected payment amounts in the coming weeks. In the meantime, there is no change to their monthly repayments,” AIB added.

Following the European Central Bank’s latest interest rate hike in July, AIB sent a letter to some customers whose loans were moved to it as part of a tranche of about 47,000 tracker mortgages from Ulster Bank as part of a €5.7 billion deal, telling them that their repayments would increase from October.

[ Irish mortgage rates hit decade high above 4% ]

While the tracker customers had expected their monthly repayments to increase as a result of the interest rate, one told The Irish Times that he found his revised repayments were to increase by more than 120 per cent from October.

He said he informed AIB about what he assumed was a mistake. However, the lender told him that previous miscalculations by Ulster Bank meant that his monthly repayments were not at a level that would allow for the full repayment of the loan within its remaining term. In order to rectify the issue and ensure there was no shortfall at the end of the loan term, he said AIB told him that the jump in his monthly payments above what was expected was necessary.

The Central Bank said on Friday that it was aware of issues affecting certain customers whose mortgages were transferred to AIB from Ulster Bank as part of the NatWest-owned lender’s wind-down of its Irish operation.

Brendan Burgess, founder of the consumer site askaboutmoney.com, told The Irish Times that the letter implied affected customers appear to have been charged the correct amount of interest by Ulster Bank but that their repayment were misstated or miscalculated. However, he said AIB had handled the situation “very badly” and that it seemed the lender had “panicked and issued a wrong explanation” instead of telling customers that it was investigating the matter.

A spokesman for AIB said: “We want to reassure those customers that they do not need to take any action. Apologising to customers for any anxiety caused, he said the bank “will take all corrective action necessary to resolve this issue for them”.

A spokesman for the Central Bank said: “We are in contact with both AIB and Ulster Bank in relation to this issue to ensure that any issues/errors identified are resolved for consumers. Under the Consumer Protection Code, regulated entities must correct errors and handle complaints speedily, efficiently and fairly.”

Customers requiring assistance are urged to contact AIB directly.

Meanwhile non-bank lender Finance Ireland is to increase its variable rate on mortgages by 0.25 per cent from September 12th.

The company, which has a 5 per cent share of the mortgage market here, said the move was being taken on the back of the European Central Bank’s latest interest rate increase.