Key Post Successful case - NIB investment property on home loan rate

Discussion in 'The Financial Services Ombudsman' started by twofor1, Jul 19, 2012.

  1. twofor1

    twofor1 Frequent Poster

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    Background
    I took out a ‘’Variable Rate Home Loan’’ on an investment property with NIB. I chose NIB as they only had the one rate, the ‘’Home Loan Rate’’, which they gave for both home loans and Investment loans. Most other lenders charged a higher rate on investment mortgages.

    In February 2009, I got a letter informing me this loan would now be called an’’ Investment Mortgage’’ and the interest rate applied would be the’ ’Investment Rate’’. NIB explained that they had simply created a new loan name and rate to better reflect the type of product I held with them. They said there were “no other changes to my account” and I didn’t need to do another thing. The SVR at the time was 4.15% for both home loans and investment mortgages.

    They omitted the fact that the investment rate was or was shortly going to be 0.75% higher than the home loan rate, as ECB reductions were only being passed on to home loans but not investment loans, which had the result of adding an additional interest payment of €750 annually for each €100K owed.

    I think it was April 2009 there was a further ECB reduction of .25% which was passed on to home loans but not investments so;

    Apr 2009 to Nov 2011
    · Investment rate remained at 4.15%
    · Home loan rate reduced to 3.40%

    This 0.75% difference remained until November 2011. They then increased their standard variable rate which includes existing investments by 0.20% to 4.35% and increased their home loan rate by 0.95% also to 4.35%, and offered discounts for home loans via their current account packages.

    My Argument
    I took the mortgage with NIB as they did not charge a higher interest rate on investment mortgages.

    My mortgage agreement clearly stated the mortgage was to purchase an investment property; the loan was called a’’ Variable Rate Home Loan’ ’and the rate of interest applied would be the ‘’Home Loan rate’’. This is what I was entitled to get, not some new rate they invented at a future date.

    As a result of my mortgage being changed to an’’ Investment Mortgage’’ I now had to pay the higher investment rate.

    What I wanted
    I wanted this mortgage to return to being a ‘’Variable Rate Home Loan’’ at the ‘’ Home Loan Rate’’ as per the mortgage agreement signed by both parties.

    How I went about it
    I followed NIB’s complaint procedure with the above argument, first with my branch to no avail, then with their complaints department in head office, who investigated and replied that, as this was an investment property, they had changed the name of the account accordingly and did not intend changing it back. On the interest rate, they said that when this mortgage was taken out, the variable rate I got was the only reference rate available at that time, they had since introduced a new investment rate and, as this is an investment property, this is the rate that would now apply to my mortgage. They said they could not apply the’’ Home Loan Rate’’ as this was now only available to borrowers in respect of their principal private residence.

    The fact that the mortgage agreement signed by both parties clearly stated this was a ‘’Variable Rate Home Loan’’ and the interest rate would be the ‘’Home Loan Rate’’ was ignored.

    They confirmed the bank’s internal complaints procedure had now been exhausted. (Final Response)

    Going to the Ombudsman
    Totally dissatisfied with NIB’s stance, I phoned the Ombudsman’s office. Understandably, they would not discuss or give an opinion on my case, but had no problem explaining the process or answering my many questions. They offered to post out the complaint form or advised that I could download it, and said I could fill it out, photocopy my mortgage agreement, final response letter and any other relevant documents and send the lot in, which I did.

    The Ombudsman replied offering as a first step mediation, advising nothing would be binding unless both parties agreed to the outcome. I felt I was entitled to the home loan rate, there was no middle ground, so I declined mediation. This was acknowledged by the Ombudsman and this complaint proceeded to investigation and adjudication.

    The first step was that the Ombudsman sent a copy of my complaint to NIB, along with a number of questions. These questions and NIB’s responses were copied to me. At this stage the Ombudsman advised that, If I wished, I could make a further submission arising from my consideration of NIB’s responses, which in turn would be copied to NIB and they would be given the opportunity to respond. I responded to the NIB submission, reiterating my argument.

    That completed the investigation process. The Ombudsman then looked at all the information and issued his finding, which was:

    “The complaint is upheld, The Complainants are entitled to have their mortgage interest calculated in accordance with the Respondents Home Loan Rate, and I direct the bank to do so.”

    Apart from myself, two others made identical complaints in 2009. The Ombudsman has summarised our cases and his Finding is on page 12 of the Financial Ombudsman’s Case Studies and Trends 2009; Reproduced in full in the next post


    Effort & Costs to take this case
    A few hours in total pulling everything together, writing letters, filling out the form and a few phone calls; financially - postage and photocopying, probably less than €5.

    Opinion
    I and others won our battles, but without doubt NIB won the war, as the fact that only 3 complaints were made in 2009 on this issue would suggest the vast majority simply accepted these changes. I would recommend to anyone dissatisfied with their bank’s decision, not to be intimidated by, or accept their bank’s word: banks are often wrong. I would encourage others to complain - once you set the ball in motion the whole process is surprisingly easy even if you have to go as far as the Ombudsman, whose office was at all times courteous, professional, helpful and very amenable to “Joe Soap” making a complaint.

    Making a complaint and the complaint procedure can be found on the Ombudsman’s website; http://www.financialombudsman.ie/

    The full thread of my case and a few other successful cases is here; http://www.askaboutmoney.com/showthread.php?t=104951
     
  2. twofor1

    twofor1 Frequent Poster

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    The Ombudsman's summary of the case

    Alteration to Investment Mortgage rate was wrong

    In separate complaints about mortgage rates against a Bank three Complainants stated that at the time their mortgages on investment properties were agreed and drawn-down, the Bank only offered one mortgage reference rate, which was applicable to both home and investment loans. They stated that the interest rate applicable on the contractual loan letters clearly stated ‘Rate of Interest’ is ‘a variable rate’. However in early 2009 they received a letter in which the Bank stated its intention to re-name the existing mortgage accounts and the mortgage rate. The Complainants stated that their ‘Investment Mortgage’ then became subject to an ‘Investment Mortgage Rate’ which was a significantly higher rate than the original standard variable home loan rate. They were of the view that the Bank acted unilaterally and without reference to any legal authority or pursuant to any contractual clause.

    In considering these cases, the Ombudsman noted that the Complainants availed of the Bank’s investment mortgage as they were aware that interest
    rate reductions which would be passed on to home loan/residential mortgages would also be passed on to their investment mortgages . The relevant interest rate reduction would be applied to the standard variable rate which was the reference rate applicable to the home loan/residential mortgages and the Investment mortgages. When the Bank applied a reduction in interest rates to the standard variable rate, it had the effect of also benefitting the Complainants’ investment mortgages as the applicable interest reference rate was reduced. He was of the opinion that the Complainants had a fair and reasonable expectation that the original benefit of passing on rate reductions to both home-loan/residential mortgages and investment mortgages would continue for the term of the loan given that this was the primary reason for availing of the Bank’s investment mortgage. Indeed up until early 2009 they had received the benefit of such interest rate reductions.

    As regards the Bank’s suggestion that it needed to manage the credit risks and pricing for the two different loan types, the Ombudsman was of the view that this matter should have been addressed in advance of sanctioning the Complainants’ investment mortgage and could not be retrospectively reassessed post draw-down of the mortgage. He was of the view also that the Complainants’ original investment mortgage agreement had been fundamentally altered by the Bank’s decision to apply a more favourable interest rate regime to home-loan/residential mortgage borrowers as the Complainants’ investment mortgage was sold to them on the basis that their investment mortgage account would also receive any interest rate reduction applied to the standard variable rate. Whilst interest rate reductions may have been originally aimed at home borrowers, it was nevertheless the case that the benefit of interest rate reductions also had to be passed on to the Complainants’ investment mortgage account as it was subject to the standard variable rate which was the rate to which the interest rate reduction would be applied.

    In short, up until early 2009, the Complainants as investors benefitted from interest rate reductions and had a legitimate and reasonable expectation that this would continue. Therefore, the Ombudsman directed that the Complainants’ investment mortgage interest be calculated in accordance with the Bank’s home loan rate and the Bank was to back-date this change to early 2009 so as to rectify the consequences of the conduct complained of.
     
  3. Dermot

    Dermot Frequent Poster

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    Congratulations to you twofor1 and I compliment you on publishing the outcome
     
  4. Brendan Burgess

    Brendan Burgess Founder

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  5. Brendan Burgess

    Brendan Burgess Founder

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    Poster DingDing was one of the three.

    Despite the Ombudsman finding in favour of three people and publishing the result, NIB still challenge each case

    For example, user Tomorrow

    Poster Butter won their case in April 2011 . But NIB made a mistake in the calculating the refund.

    Poster 10amwalker also won in 2011

    Poster Ross in Sept 2011 got the result without going to the Ombudsman

    Poster Biker in November 2011 won through the Ombudsman

    Greenoverred Moved to Bank of Ireland because of the high NIB rate. Lost his case with the Ombudsman . His case is different from the above cases.
    NIBROB had lost his case before finding askaboutmoney

    The following people reported the same problem but have not reported how they got on


    Rasher

    Nailer71 Not sure if he has exactly the same problem
    Jugovic
     
  6. DingDing

    DingDing Frequent Poster

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    Hi,

    I will post the details of our case over the weekend as I want to review my file on this.

    Just to say in advance I found the Ombudsman's office brilliant and very easy to deal with.

    They launched an excellent investigation which delivered a positive outcome for us.

    I want to thank Brendan for the resource of a brilliant website and the other posters who assisted us in the appeal and gave us the confidence to persue this to a successfull conclusion.

    I would encourage anyone who got these letters to contact the ombudsman as my recollection was that NIB regard each case as being different and fight each case individually.

    If anyone is interested please PM me and I will try to explain the approach we adapted.
     
  7. twofor1

    twofor1 Frequent Poster

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    I am not aware of this case ever getting any media coverage.

    It does not appear the Ombudsman has told NIB to fix the problem for others, as you say, late last year some posters here were still winning similar cases.

    I don’t know why the Ombudsman cannot direct NIB to apply the home loan rate to all investment mortgages where the T&c’s state it is the applicable rate. He was able to give a much broader ruling in a totally different complaint the same year, directing a Building Society to apply the original margin to a tracker mortgage after a fixed term ended. Interestingly in this case he added;

    ‘’He also considered that the Society should review if cases similar to this one had arisen or may arise in future and if so, he considered that the same approach be applied. For that reason he copied his Finding to the Financial Regulator for any action it deemed appropriate to take including industry wide though he noted that other providers specified in detail what rate would apply at the end of a fixed rate period.’’


     
  8. DingDing

    DingDing Frequent Poster

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    My Experience

    My Experience.
    I adopted the same approach as twoforone as outlined in the first post in this thread.

    We got the final letter from the NIB, this is necessary before the ombudsman will take on the case. Once we got that letter we filled in a 2 page form and accompanied it with a 2 page documment outlining our position.

    THere was a slight delay in our case as the person who signed the final letter was not one of the NIB staff that were approved by the ombudsmans office to issue a final letter.

    The ombudsman contcted us almost immediatly to see if we wanted to mediate which we declined. We felt that it was all or nothing. The risk with mediation was we felt it would have to lose something in the mediation process. The NIB also declined mediation.

    The ombudsman then proceeded with the investigation and he sent our complaint to the NIB. He also asked the NIB a series of questions and for a copy of all internal and external correspondance.

    The NIB responded in detail (11 pages) and a copy of emails between NIB managers on our case.

    The ombudsman forwarded a copy of all this information to us and invited us to comment.

    We commented in detail on the NIB's response and the emails.

    We responded to the ombudsman by email and the response went to 6 pages where we addressed each point in detail.


    The ombudsman after a couple of months issued a response upholding our position and gave the NIB the opertunity to appeal the decision.

    The NIB wrote to us saying they were not going to appeal and our account was credited with the overcharge and interest based on their deposit rate.

    It is important to note that the victory was only short lived, a couple of years later the NIB raised their home loan rate and now both rates attract the same interest.

    In any case it is worth appealing as for the couple of years there was a difference you could have saved a couple of grand.

    In fairness to the NIB, they did not raise the home rate during a period when others were.

    Just to reiterate how useful a resource the thread was on askabout money and the experience of the others.
     
  9. twofor1

    twofor1 Frequent Poster

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    True, But if your investment mortgage like mine is a’’ Variable Rate Home Loan’’ would you not be entitled to the 0.45% discount available via the Prestige Package?

    http://www.nationalirishbank.ie/en-ie/Personal/Day-to-day/Current-Accounts/products/Compare-accounts/Pages/Compare-accounts.aspx

    Admittedly you would have to pay the €125 annual package fee but, but after paying the fee and even disregarding the other benefits, you would still be saving €325 annually for the first €100K owed, thereafter €450 annually for each additional €100K owed.

    I have not pursued this as, back in 2007, I applied for and got a 0.4% discount on my ‘’Variable Rate Home Loan’’ for my investment property, the package discounts are not available in conjunction with any other discount. I currently pay 3.95%
     
  10. Brendan Burgess

    Brendan Burgess Founder

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    Hi DingDing

    I have no doubt that if NIB had separate rates, you would be paying around 1% more. Your work has forced them to charge just the one rate.

    AIB has separate rates and charges its buy to let customers 0.95% more than its home loan customers

    Bank of Ireland charges its buy to let customers 1.15% more than its home loan customers.

    I think that PTSB is at least 1% higher as well, but they don't publish their rates.

    And as twofor1 points out, you can reduce the home loan rate further by opening a current account with NIB.

    Not only that, thousands of other customers have benefited from your work without knowing it. They are paying 4.35% now "automatically". They would be paying far more if NIB had retained the separate rate.
     
  11. DingDing

    DingDing Frequent Poster

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    Twofor1, We are on a prestiege current account, we consolidated our accounts in the NIB when the AIB introduced charges. We did not avail of the mortgage interest rate reduction as the bank wanted us to sign a new loan agreement, basically taking out a new mortgage. We declined as there was a lot of extra stuff in the new mortgage agreement and we did not trust them with the change. We already have a 0.24% discount for the term of the mortgage so the prestiege would be worth only 0.21% to us.

    Brendan, thanks to your comments above, however the work was made easier because of the information we shared on the forum. Hopefully more people get to hear about it and could get back up to 2K.
     
  12. Brendan Burgess

    Brendan Burgess Founder

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    I think it would be useful to clarify the timeline on this for other potential claimants

    February 2009 -

    • NIB wrote to customers telling them that their account was being renamed
    • SVR at the time was 4.15% for both home and investments
    Feb 2009 to November 2011


    • Investment rate remained at 4.15%
    • Home loan rate reduced to 3.65% (Anyone got a schedule of these reductions?)
    November 2011

    • NIB increased home loan rate to 4.35% to match investment rate
    NIB has not passed on any of the last three rate reductions to any borrowers?
     
  13. DingDing

    DingDing Frequent Poster

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    Would the people who took out a home loan during the period when there were 2 rates have a case? Essentially they had a discounted home loan rate that they lost when the rates were merged. All the arguments that the bank made to justify splitting the loan should support this position.
     
  14. Brendan Burgess

    Brendan Burgess Founder

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    A very interesting point.

    Johnny took out a home loan in June 2010 when the home loan rate was lower than the Investment property rate.
    Now he is paying the same.

    It might be worth challenging it, but I doubt if it would succeed.

    They took out a SVR home loan
    They still have a SVR home loan
    The rate is high, but so are the rates of PTSB and Ulster Bank.

    With the others, PTSB changed your actual product after you took it out.

    Brendan
     
  15. Butter

    Butter Frequent Poster

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    My case ran very much as twofor1's case did. Reading about his case & dingding's was what motivated me to do something about my own case. I also agree that it was a relatively simple procedure to use the ombudsman's office - just a lot of writing of letters from when I first asked NIB to restore my mortgage to the SVR Home Loan. Following the ombudman's ruling in my favour NIB credited my current account with my overpaid interest & managed to miscalculate what the bank owed me. They did credit the correct amount when I pointed out the error in their calculations.

    The whole thing left a bad taste in my mouth I must admit. While I was delighted to have won my case & had my loan restored to the home loan rate the fact that they then raised that home loan rate by 0.95% wiped out any potential saving that I would have made. I also felt that the bank chose to do this as as a means of stopping these cases at that time.
    However it is still worthwhile for anyone with a now named investment home loan to argue that it should be restored to the home loan mortgage if it was specified in their original contract. Although the rates are the same now - NIB retains the ability to raise the invest loan rates over the home loan rates at any time. I do not doubt that they will do so in the future.
    I would like to see the FO make a similar judgement in this case (that NIB should act in all these cases) & send it to the Financial Regulator.
     
  16. Brendan Burgess

    Brendan Burgess Founder

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    This is a very good point.

    In February 2009, they changed the name of people's accounts.
    What if they start pushing up the rate on the investment mortgages in March 2015?
    NIB will claim that as it's more than 6 years since the behaviour complained of, it will be too late for the FSO to consider the case.
     
  17. twofor1

    twofor1 Frequent Poster

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    I think it was April 2009 there was a further ECB reduction of .25% which was passed on to home loans but not investments so;

    Apr 2009 to Nov 2011
    · Investment rate remained at 4.15%
    · Home loan rate reduced to 3.40%

    This 0.75% difference remained until November 2011. They then increased their standard variable rate which includes existing investments by 0.20% to 4.35% and increased their home loan rate by 0.95% also to 4.35%, and offered discounts for home loans via their current account packages.
     
  18. twofor1

    twofor1 Frequent Poster

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    I agree, people should complain now. There was 0.75% difference for 19 months which could be reclaimed and a direction from the Ombudsman to apply the ‘’Home Loan Rate’’ would protect against future increases on investment properties which without doubt will come.
     
  19. Brendan Burgess

    Brendan Burgess Founder

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    Are these discounts documented anywhere?

    When were they actually introduced?

    If the Ombudsman tells NIB to charge customer A and customer B the same rate and NIB complies, but then offers customer B a discount, then I think that customer A should get that discount as well.
     
  20. twofor1

    twofor1 Frequent Poster

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    May be eligible for a preferential home loan discount rate on your mortgage interest rate. Terms and Conditions apply, salary or equivalent regular income required to be mandated to the account. Loans subject to credit assessment.

    http://www.nationalirishbank.ie/en-ie/Personal/Day-to-day/Current-Accounts/products/Prestige/Pages/Prestige.aspx

    http://www.nationalirishbank.ie/en-ie/Personal/Day-to-day/Current-Accounts/products/Compare-accounts/Pages/Compare-accounts.aspx

    I think it was a phased process. In my case free current accounts ended on 1st June. Three options were available, 24/7, Easy Plus or Prestige. Unless I told them otherwise, I would automatically be moved to their 24/7 package on that date.

    I agree customer A should also get any discount, that’s what I am referring to in post 9 above, DingDing explains in post 11 above, he was offered but declined this discount.