Judgment reserved on tracker mortgage order

THE HIGH Court has reserved judgment on a challenge by a mortgage lender to 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 plc, trading as Permanent TSB, after finding the lender should have made clear, and 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 became unemployed, had complained to the ombudsman that the lender did not clearly explain the consequences of switching. The ombudsman upheld their complaint in February.

The lender challenged that decision in proceedings which concluded yesterday before Mr Justice Michael White, who reserved judgment to next month.

Permanent TSB claims there were “significant errors” in the ombudsman’s findings, including his finding that the bank had a “fiduciary relationship” with the couple. The court heard the couple took out a 35-year mortgage for €395,000 with the lender in 2007 with the interest rate fixed for the first three years after which the rate would revert to a tracker rate, following European Central Bank rates.

In January 2009, they contacted Permanent TSB’s Lucan branch inquiring if there was an exit fee for the fixed rate mortgage. They said 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 per cent.

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