# Has anyone been charged penalty interest on arrears on a home mortgage?



## Brendan Burgess (11 Mar 2010)

The EBS claims that they don't charge penalty interest on arrears on home mortgages.

But does any lender do this? I think that the Bank of Ireland mortgage documentation allows them to do it, but in practice they don't.

As far as I know, the last lender to do this was the Irish Nationwide.

I know that other lenders do charge penalty interest on commercial loans.

Brendan


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## Papercut (11 Mar 2010)

*Re: Has anyone been charged penalty interest on arrears?*

ACC charge 0.05% per month for unagreed missed or late payments.


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## Brendan Burgess (12 Mar 2010)

*Re: Has anyone been charged penalty interest on arrears?*

Hi Papercut

Do ACC do Home Mortgages? 

According to this article, AIB, Bank of Ireland and Start do  charge penalty interest of 6% on arrears. I have not seen it implemented  in practice for AIB and Bank of Ireland 




> AIB admitted it imposes  surcharge interest of 6pc APR (annual   equivalent amount) on arrears.
> [broken link removed] said it charges a penalty of 0.5pc a  month, or 6pc a year,  on the arrears amount only.
> [broken link removed]  along with  its sister operation [broken link removed]  ([broken link removed]) said it  imposes a charge of €12 if a  direct debit being used to make mortgage  repayments is unpaid.
> Subprime lender Start Mortgages imposes the  highest surcharge at 1pc a  month on the arrears balance. This works out  at 12pc in annual terms.


Brendan


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## Papercut (13 Mar 2010)

*Re: Has anyone been charged penalty interest on arrears?*

Brendan, they provided them up until about 2001, & haven’t accepted new applications since then.


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## luckystar (13 Mar 2010)

*Re: Has anyone been charged penalty interest on arrears?*

a case i know of: Bank of Ireland didn't last summer on 8 months of arrears. As a matter of interest bank agreed for arrears to go over 24 months... 9 months in and they called to offer interest only for next 6 months to clear arrears (obviously keeping up same payment for 6 months) thought it was a great idea!


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## bond-007 (14 Mar 2010)

*Re: Has anyone been charged penalty interest on arrears?*

GE Money also charge penalty interest.

I also remember that IIB used to charge *1% per day* on arrears.


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## Questionable (15 Mar 2010)

*Re: Has anyone been charged penalty interest on arrears?*

I got a letter in the post recently from EBS, with a penalty interest charge for arrears, a nominal amount resulting from an arrears of €25 for a short while when I switched from monthly to fortnightly repayments.


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## Brendan Burgess (15 Mar 2010)

*Re: Has anyone been charged penalty interest on arrears?*



bond-007 said:


> GE Money also charge penalty interest.
> 
> I also remember that IIB used to charge *1% per day* on arrears.



Hi James

This thread is about home mortgages. Do GE Money do home mortgages? 

I am sorry, but I don't trust your memory. IIB may have charged penalty interest, but they did not not charge 365% APR on arrears.(assuming it was 1% flat rate) 

How long ago was this? It's the current practice I am interested in.

Thanks


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## Brendan Burgess (15 Mar 2010)

*Re: Has anyone been charged penalty interest on arrears?*



Questionable said:


> I got a letter in the post recently from EBS, with a penalty interest charge for arrears, a nominal amount resulting from an arrears of €25 for a short while when I switched from monthly to fortnightly repayments.



Hi Q

The reason I ask the question is because the EBS has called for penalty interest to be abolished. I don't believe that anyone is charging it at the moment, with the possible exception of the sub-prime lenders. 

Would you mind checking the letter and reproducing it verbatim. 

I suspect that they had a small fixed charge for going over limit, but that would be a different thing. But in itself that would be interesting as it could be seen as a bit cheeky to call for penalty interest to be abolished while imposing charges for arrears.

Brendan


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## bond-007 (15 Mar 2010)

> Do GE Money do home mortgages?


They certainly did. They no longer offer mortgages. They did offer sub prime mortgages until the banking crisis hit in the last 18 months.

IIB did charge 1% per day on arrears. So if your monthly payment was €1000 and you were 7 days late that would mean €70 in penalty interest. I must dig out the old IIB agreement I have and find the exact clause.


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## Questionable (16 Mar 2010)

*Re: Has anyone been charged penalty interest on arrears?*



Brendan said:


> Hi Q
> 
> The reason I ask the question is because the EBS has called for penalty interest to be abolished. I don't believe that anyone is charging it at the moment, with the possible exception of the sub-prime lenders.
> 
> ...


 
Hi Brendan, 

This was not a fixed charge, I'll post as requested later today.


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## Questionable (18 Mar 2010)

*Re: Has anyone been charged penalty interest on arrears?*



Questionable said:


> Hi Brendan,
> 
> This was not a fixed charge, I'll post as requested later today.


 
Dear Mr. XXXXXXXXXX

Our records indicate that, at the close of business on the date above, payments on your loan were underpaid by €XX.XX. Details are shown below:

Date account went into arrears                   xx/xx/xxxx
Amount of arrears                                     €XX.XX
Number of months in arrears                        X
Additional interest from arrears to be 
applied next month                                    €X.XX
Accumulated additional interest applied
to your accountarising from mortgage arrears €X.XX
Applicable interest rate                              X.XX%

Then the usual spiel...non payment of loan...MABS leaflet, blah blah, resulting from an administrative error on their part as I moved from monthly to fortnightly repayments.

I was going to let it pass, but I think I might write to them now.


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## Brendan Burgess (18 Mar 2010)

Hi Questionable

I don't think that this is penalty interest. 

let's say that I pay €10,000 in interest this year if I pay my mortgage on time. Let's say that the interest rate is 3%

If I have arrears of €1,000 , for 12 months, then I will pay an  additional €30 interest by being in arrears. This is fair. 



> Applicable interest rate                              X.XX%



Can you confirm that this is the same rate that you pay on your mortgage and is not higher on arrears? 

Brendan


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## Questionable (19 Mar 2010)

Brendan, yes you are correct, it is the same.


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