# I can't understand permanent tsb's overall figures



## Brendan Burgess (19 Aug 2015)

In 2012, in the High Court, ptsb said that the computer glitch cost them €33m.

According to the press statement in 2015, only 1,152 customers were affected by this.  This would give an average cost of €28,645 each.

Something is wrong somewhere. I have documented break fees at the time for other lenders, and the average break fee was €8k. The highest was €20k.

So was the €33m an overestimate?





How do lenders calculate cost of breaking a fixed rate?

breaking out a fixed rate mortgage


*From the offer letter *

*“Early Repayment *

“Early Repayment
Wherever  repayment  of a loan in full or in part is made before  the expiration  of the Fixed Rate Period  the applicant  shall, in addition  to all other  sums  payable,  as a condition  of and at the time of such repayment,  pay whichever  is the lesser  of the following  two sums:
(a) a sum equal  to one half of the amount  of interest  (calculated  on a reducing  balance  basis) which would have been payable  on the principal  sum desired  to be repaid,  for the remainder  of the Fixed  rate Period,  or
(b) a sum equal to permanent  tsb's estimate  of the loss (if any) occasioned  by such early repayment,  calculated  as the difference  between  on the one hand the total amount  of interest (calculated  on a reducing  balance  basis} which  the applicant  would  have paid on the principal sum being repaid  to the end of the Fixed Rate Period  at the fixed  rate of interest,  and on the other  hand the sum (if lower) which  permanent  tsb could earn on a similar  principal sum to that being repaid  if permanent  tsb loaned  such sum to a Borrower  at its then current :New Business  Fixed rate with a maturity  date next nearest  to the end of the Fixed rate Period of the loan, or part thereof,  being repaid.”  



So on a €200k loan at 5% with two years to go

Interest to go for two years €20k
penalty: 50% or €10k

or
Interest to go for two years : €20k
Interest on a similar loan fixed for two years @4% : €16k
Loss €4k

Whatever way you look at it, the average cost of breaking will be much smaller than €25k


From the High Court judgement

“While ILP honoured the no penalty quotations, the uncontradicted evidence before me was that this computer error was extremely costly for ILP - with a net loss of over €33m.-and that ILP suspended switching in February 2009 when the problem was discovered until it could be rectified.”


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## Gerry Canning (19 Aug 2015)

Brendan,

Could it be cuteness and taking max out of it so as judge says{extremely costly for ILP} and feels sorryish for them ?
Could it be that mathematics arn,t ILP,s strong point?
Could it be they didn,t expect a (Brendan) type to do the sums?

Could it be they can,t tell the truth? and is that unusual.


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## kmick (19 Aug 2015)

They could be including the costs of bringing in outside IT help to fix the problem. Any IT expertise called in at short notice will be expensive.


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## Gerry Canning (19 Aug 2015)

Could well be ,but that was never reported to my knowledge.
I do accept that I start with the (doubting Thomas) mindset.

Given their protracted messing on tracker mortgages/ppi etc I think I will stay with my original comment.


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## Brendan Burgess (19 Aug 2015)

kmick said:


> They could be including the costs of bringing in outside IT help to fix the problem.



They fixed it in a week, when they decided to fix it, so that wouldn't cost that much. 


Brendan


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## Bronte (19 Aug 2015)

It it cost 33 million is that not tax deductable?


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## Brendan Burgess (19 Aug 2015)

It would be if they were profitable.  But I don't think that they have paid any taxes for years as they have not made any profits for years.


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## Bronte (19 Aug 2015)

Don't losses get carried forward and will eventually reduce profits and therefore taxes?


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## Andy836 (19 Aug 2015)

Does (i) the 1,152 figure only relate to those who are now being allowed go onto tracker mortgage, and (ii) was there a much larger number of Borrowers who broke out of fixed rates who shouldn't have?


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## phil (19 Aug 2015)

I broke out with no charge. I believe that I an entitled to my tracker mortgage back but I was part of investigations but not redress.


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## Brendan Burgess (20 Aug 2015)

Interesting points.

So you are suggesting that there were far more than 1,152 who broke out of their trackers without penalty. This cost the bank a lot of money in terms of lost interest rates. But only 1,152 of them have got their trackers back.

You might be onto something.

In what cases did they not get their trackers back?
1) Where ptsb informed the borrower that they would lose their tracker, but the borrower went ahead anyway.
2) Where people who were not contractually entitled to trackers on expiry of the fixed rate,(in ptsb's opinion) were allowed to break out without penalty. (Phil's case)


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