# BoI/ICS kicking people in arrears off trackers



## Brendan Burgess (29 Nov 2012)

*Buy-to-let investors who can't pay to lose valuable tracker mortgages*

by Charlie Weston in today's Indo 





> BANKS are starting to put the squeeze on buy-to-let investors,  warning they will lose their valuable tracker mortgages if they don't  strictly meet repayments.
> [broken link removed] confirmed it is taking away trackers from any investors who struggle to keep up with payment demands..
> ...
> 
> ...



Is this legally sound?  

If a BoI customer can't make their full repayment, can the Bank just scrap the tracker?  OK, the customer has breached their contract, but does that allow the bank to unilaterally change it? 

The bank is under no obligation to reschedule the mortgage. 

The contract might allow for penalty interest on arrears and if so, the bank is legally entitled to charge it. 

If the borrower continues to be in breach of contract, the bank can seek to repossess the property, and probably should do so. 

But I doubt if they can just change the rate. 

They could offer the borrower an option - to switch to a SVR to avoid repossession.


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## Importer (29 Nov 2012)

I suppose the banks are entitled to alter the interest rate (tracker or not) if the contract between the parties provides for this, to remedy a repayment lapse


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## Brendan Burgess (29 Nov 2012)

Hi Importer

If the contract provides for this, then it is probably ok, as long as the term is not an unfair term.  But unless the contract specifies this, I don't think that they can do it.

Brendan


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## Importer (30 Nov 2012)

I'd be surprised if this is not covered in the terms and conditions of every loan contract. I recall seeing these types of clauses in the past and the banks are usually sharp enough when it comes to laying out the ballpark conditions for default.

I might be flamed for this but yes I do think its fair for banks to levy extra charges for accounts in default, including loss of tracker. We can't expect to have it every way........


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## Brendan Burgess (30 Nov 2012)

I think that the extra charge has to be proportionate and I would expect that the Ombudsman and court would take that view. To lose a tracker over a short period of arrears would be disproportionate. 

A more proportionate approach would be to charge the borrower the SVR on the arrears but leave the rest on the tracker.


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## venice (30 Nov 2012)

> But now the bank says any investor who has come to the end of their interest-only deal would be losing their tracker rate.



Am I right is thinking that if the contract states that you go onto a Tracker after the interest only is up that the bank have to honour that. If so what does the above statement mean? 
So if you stick to the terms of the contract, irrelevant of whether it is a residential or commercial mortgage are you safe from the banks skulduggery on this issue?


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## Importer (30 Nov 2012)

I wouldn't expect our Ombudsman or Courts to challenge explicit terms
of a properly executed loan contract. This would make a complete mockery of our contract law.

In much the same way as the law is not able to interfere with "upwards only" rent reviews in commercial lease contracts or contractual obligations in bankers pensions, I don't believe they can or will either interfere with any terms explicitly laid out in a loan agreement. I could be wrong but that's my feeling.

If we cant rely on the stability of written contracts, then we are completely lost and our credibility as a country is shot.


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