# Ombudsman: "No basis to reasonably expect "variable rate" would relate to a tracker interest rate"



## Brendan Burgess (7 Aug 2020)

Decision 2020 -0064

August 2005  Mark offered a mortgage  - chose 2 year fixed rate 

June 2008 - Fixed rate expired - Offered a choice of rates "If he did not select a rate , mortgage would default to ECB +1.5%" 
                    Mark fixed for 5 years

June 2013 -  Mark claims that he understood that ECB +1.5% was the default rate on the contract and he should get it.

_He stated that the bank’s ‘description’ of the variable rate in his contract was ‘general’ and ‘does not exclude the
tracker option as that too is a type of variable rate._

There was no contractual entitlement to a tracker rate.
The bank's practice from 2006 to 2009 was to default people coming off fixed rates to trackers, whether they had a contractual entitlement or not.

Ombudsman held that offering a tracker rate in 2005, when he was first offered the mortgage and again in 2008 did not create an obligation on the bank to offer that tracker rate later.


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## Brendan Burgess (7 Aug 2020)

2020 -0061  - Summary from digest attached.

*No basis to reasonably expect the term "Variable Home Loan Rate" to relate to a tracker interest rate, given that there was no reference to a tracker or the ECB rate in the loan offer letter.*


2005 Fixed for 5 years
2010 When fixed rate expired switched to SVR

_Kerry submitted that the offer letter she signed in September 2005 did not stipulate that the rate applicable on the expiry of the fixed rate period would be the bank’s standard variable rate. She asserted that it was not clear what type of variable rate was referred to in the offer letter, for example, ‘Standard Variable Rate, Discount Variable Rate, Tracker Rate etc’. She submitted that the loan offer was ‘unspecific and  flawed in its wording’.

The Ombudsman found that the terms and conditions of the loan offer letter envisaged that at the end of the fixed interest rate period, the bank ‘may’ offer a further fixed interest rate period or ‘alternative available products’ and that
if no such offer was made or if an offer was made and it was not accepted, then the Home Loan Rate would apply. The Home Loan Rate was stated to be one which could be adjusted by the bank. He found that there was no basis for Kerry
to reasonably expect the term ‘Variable Home Loan Rate’ to relate to a tracker interest rate, given that there was no reference to a tracker or the ECB rate in the loan offer letter. _


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## demoivre (7 Aug 2020)

I wonder to what extent does the quality of the complainant's appeal influence the Ombudsman decision? I've read a few of the decisions and not once have I seen the complainant refer to Article 5 of  the EU unfair contract terms directive which states

_In the case of contracts where all or certain terms offered to the consumer are in writing, these terms must always be drafted in plain, intelligible language. Where there is doubt about the meaning of a term, the interpretation most favourable to the consumer shall prevail ._

So there only has to be doubt ie * any* ambiguities in the mortgage contract are to be interpreted in favour of consumers.  " Variable Home loan rate " , mentioned above, is not a well defined term imo.

Also worth noting that using the term "Variable Home loan rate" to mean " Standard Variable rate" directly contravenes some of the Transparency considerations set out in the Framework document issued to the Banks in 2015

_3.6 TRANSPARENCY CONSIDERATIONS
3.6.1 In the course of the Examination, and in the context of the transparency of the documentation provided to customers, the lender is to consider whether there was potential to confuse or mislead customers including, but not limited to: 

a particular term pertaining to the loan agreement was given different meanings by the lender at particular points in time or whether certain terms had dual meanings, with the potential to confuse customers; 

products or interest rates were given different names with the potential to confuse customers in relation to the nature of the product or rate; _

 Variable Home loan rate is a different name for Standard variable rate !


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## Brendan Burgess (7 Aug 2020)

Hi Demoivre

1) The Ombudsman would be influenced by the quality of the submission from the complainant. But he would also try to compensate for a poorly submitted complaint by thinking about the issue generally.

2) It's not enough for a complainant to say "I  think that is ambiguous" 

_He found that there was no basis for Kerry to reasonably expect the term ‘Variable Home Loan Rate’ to relate to a tracker interest rate, given that there was no reference to a tracker or the ECB rate in the loan offer letter._ 

That seems a very sensible decision by the Ombudsman. 

It would be great if he would publish principles.  If there is nothing in the loan offer which refers to a tracker or the ECB rate, then there really is no ambiguity. 

I am sure that in cases where there is any genuine ambiguity, the Ombudsman favours the borrower. 

Brendan


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## demoivre (17 Aug 2020)

Brendan Burgess said:


> I am sure that in cases where there is any genuine ambiguity, the Ombudsman favours the borrower.



I'm not so sure as interpretation of ambiguity is subjective but I do get that someone has to make the call on it. However what's indisputable in Kerry's case is that her contract contains a clear breach of the " Transparency Guidelines"  contained in the Framework Document and for that breach there is no sanction .


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