# Split mortgage in two, - got tracker back on one.



## odonoghe (24 Jan 2017)

Apologies in advance for my really long post however just reading this thread for the 1st time


Like most our situation is slightly unique I believe. We have already been written to and received compensation from AIB for redress for the tracker issue relating to our mortgage account. However the complexity arises from the fact that our mortgage account was split over 2 separate accounts just prior to drawdown in September 2008. Originally when applying, and the loan was being underwritten (I plan to request the underwiting docs and original loan application docs from AIB), we were intending to place the whole loan on tracker from the very start. Cast your minds back to September 2008 when there was a lot of volatility with interest rates where there had been a period of increasing rates. With this in mind plus childcare becoming an issue I spoke with my liason person in AIB for the loan who suggested a workaround would be to split the account between 50% Tracker and 50% 3 year fixed, the fixed rate being 5.2% compared with the Tracker rate of 5.75% (4.25% ECB + 1.5%) margin.

I agreed to go with this and have the original loan offers, both with the famous section 3.2 reference including the option to return to Tracker after a period of fixing.

Almost immediately into the loans, Oct/Nov 2008, ECB rates begin to plummet. From my recollection, and backed up by statements I received from AIB covering this period, I contacted AIB to see what options we had with the 3 year fixed loan as it was obvious Rates were only heading one direction and this would prove expensive if left at 5.2%. They gave us the option to break from the initial 3 year fixed loan without a breakage fee within a month of the original loan drawdown, offering the option to go onto a variable rate. An option to move to a Tracker was not forthcoming, keep in mind this coincided with the ending of the Tracker offering from AIB in Oct 2008. However as this proved a far cheaper option we accepted this at the time. I have requested an exact date and any documentation showing the status of this loan changing from AIB just this morning as I believe this to be key. At the time I was surprised AIB allowed us to seamlessly transfer to a variable rate like this with no breakage fee. The other Tracker loan was still in its original status at this point.

Fast forward 8 months to June 2009, with a second childcare cost to cover imminently and with a seemingly competitive offering of 4 year fixed at 3.57%, we decided to fix both loans thus moving from Tracker to Fixed for one loan and Variable to Fixed on the other loan. We wanted certainty at this point and didn’t realise the consequences to come down the track. There was no indication that an eventual return to Tracker would still not be possible, as per T & C's on both loans, at the end of this 4 year fixed period for either loan in the documentation we have marking this new 4 year fixed term.

At the end of the fixed term in June 2013 AIB wrote to us offering the standard range of variable and fixed options on both loans, the default variable being at 4.4%. No mention of options of returning to Tracker, which I now believe on both loans we were entitled to. This is even more relevant as at this point my wife was unemployed and we were on the vista of arrears which commenced in Aug 2013.

Fast forward to Oct 2014, after 14 months of battling AIB over how to handle our arrears issue we negotiated, via IMHO, a 3 year lower interest rate (2.5%) fixed schedule to expire October 2017.

In the interim in August 2016 AIB wrote to us regarding redress on the loan which had commenced life as a Tracker in 2008. They have subsequently offered us redress and compensation on this loan back to the original fixed date in June 2009, the compensation element I plan to appeal on the basis of our arrears issues with them, and unsecured lenders on their advice, and our current tattered ICB rating. This loan is now back on the rate of ECB + 1.5% margin, where it commenced.

However what I am now most interested in is the status of other loan which remains on the 3 year 2.5% re-schedule until October 2017. This loan, which started off life briefly as a 3 year fixed, quickly flipped to variable at no breakage within 1-2 months of drawdown, and subsequently re-fixed for 4 years some 9 months later. Worse case scenario I imagine they will offer us a return to Tracker, probably at a margin of 3.67% in October next. I believe we should challenge this margin? Also we should, at a minimum, look for redress of this loan to be reconciled back to June 2013 when we came off the 4 year fixed rate, as this loan was subject to the famous Section 3.2 reference to returning to Tracker from a fixed rate? Keeping in mind AIB placed this on 4.4% variable at this stage, no matter what Tracker margin they are claiming as applying to this loan in June 2013 it is cheaper than the variable offering.

Appreciate you reading this, just looking for thoughts?


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## Brendan Burgess (24 Jan 2017)

odonoghe said:


> With this in mind plus childcare becoming an issue I spoke with my liason person in AIB for the loan who suggested a workaround would be to split the account between 50% Tracker and 50% 3 year fixed, the fixed rate being 5.2% compared with the Tracker rate of 5.75%



You contacted them. 
You were concerned about rates rising. 
They gave you an option which you took. 
I see nothing wrong with AIB's behaviour here. 

The fact that you were worried about rates is reinforced by your decision to fix later. 



odonoghe said:


> I contacted AIB to see what options we had with the 3 year fixed loan as it was obvious Rates were only heading one direction and this would prove expensive if left at 5.2%. They gave us the option to break from the initial 3 year fixed loan without a breakage fee within a month of the original loan drawdown, offering the option to go onto a variable rate.



Again, this seems fair enough to me. You "knew" that variable rates were going to fall. They let you out of an expensive fixed rate deal.  They made that conditional on moving to a variable rate.  You could have stayed on your fixed rate for three years and then availed of the tracker at "the then prevailing rate". 



odonoghe said:


> At the time I was surprised AIB allowed us to seamlessly transfer to a variable rate like this with no breakage fee.



So am I. 



odonoghe said:


> Fast forward 8 months to June 2009, with a second childcare cost to cover imminently and with a seemingly competitive offering of 4 year fixed at 3.57%, we decided to fix both loans thus moving from Tracker to Fixed for one loan and Variable to Fixed on the other loan.



Seems reasonable to me.  You wanted certainty and you got it.



odonoghe said:


> We wanted certainty at this point and didn’t realise the consequences to come down the track.



At the end of the fixed period you should have been given the cheap tracker rate on one half of the loan, and the prevailing rate on the other half. 

That was AIB's error for which you will be getting a refund and compensation. 



odonoghe said:


> They have subsequently offered us redress and compensation on this loan back to the original fixed date in June 2009,



This makes no sense. You were on a tracker in June 2009 and you chose to fix it. They did not deprive you of the tracker.  You gave it up for 4 years.  They should compensate you only from June 2013.  



odonoghe said:


> the vista of arrears which commenced in Aug 2013.
> 
> Fast forward to Oct 2014, after 14 months of battling AIB over how to handle our arrears issue we negotiated, via IMHO, a 3 year lower interest rate (2.5%) fixed schedule to expire October 2017.



I think when you add up all the complexity of this situation, AIB has treated you fairly well. They allowed you out of an expensive fixed rate deal free of charge. They gave you a tracker from the time you fixed, for which they had no obligation. When you got into arrears, they gave you a great deal compared to the rate you would have been on. 

So on the cheap tracker you paid a bit over the odds. On the prevailing rate tracker you paid a fair bit less because of the 2.5% rate. I would say that there wouldn't be much of a refund due to you.

The primary cause of arrears is usually the loss of one's income. If I were on the Appeals Committee, I would ask if you would have been in arrears anyway, had you been on the cheap tracker since June 2013.  If your payments were less than they should have been had you been on the right rate, I would not award you any additional compensation. 

Brendan


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## odonoghe (24 Jan 2017)

With respect Brendan Burgess there is a large difference (in June 2013) between being placed on 4.4% on 50% of our mortgage loan compared to 1.5% which we would be entitled to if AIB had been honouring the contract re our original tracker loan. Furthermore if you combine that fact with the fact they should have given us the option of returning to 3.67% on the 2nd loan, the arguable new prevailing rate Tracker Margin, and the fact that we have performing on the reschedule since 2014, I don't think it takes a genius to figure out that AIB's handling of this issue underpinned the arrears issue we experienced and subsequent issues we have had since.

Not claiming to have made the best decisions along the way ourselves, hindsight is 20:20, what I was actually trying to establish was the status of the 2nd loan. Must say I am amazed with your judge and jury dissection!!


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## Brendan Burgess (24 Jan 2017)

odonoghe said:


> Appreciate you reading this, just looking for thoughts?





odonoghe said:


> Must say I am amazed with your judge and jury dissection!!



You should have specified that you wanted only thoughts which coincided with your own. 

Brendan


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## Brendan Burgess (24 Jan 2017)

In June 2013, the ECB rate was 0.5%, so you should have been on 2% (ECB +1.5%) on half the loan and 4.17% on the other half. 

I agree that there is a large difference.  But was there also not a large difference earlier between the fixed rate which they let you off and the variable rate you ended up on? 

In June 2009 you fixed at 3.57% for 4 years.  You moved from a variable rate which you knew was a tracker. You say that they are going to put you back on the tracker anyway. Which would be 2.5% (ECB +1.5%) which was a huge difference. 

You seem to be seeing only the bit which they did wrong.  They have been very fair in their treatment of you. 

Brendan


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## odonoghe (24 Jan 2017)

Brendan, with due respect I will not get into a ding dong with you over a thread.. if you want feel free to contact me offline


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## mister32 (25 Jan 2017)

Brendan

The point is the underhanded way the bank tried to take away the tracker on the second loan.


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## Brendan Burgess (25 Jan 2017)

Hi mister

Probably because there are two loans, this is more complicated than it is.


*First loan *

Sept 2008 fixed for three years at 5.2% when they could have had a variable of 5.75% .
AIB allowed them to break out of this expensive fixed rate, which they were under no obligation to do.
AIB was obliged to offer them a tracker rate at the prevailing rates. If they had pointed this out an if they had won the argument, AIB would probably have offered them ECB +3.67%, so they would have been far worse off.
In June 2009 Fixed this loan for 4 years at 3.57%
June 2013 - again they should have offered a tracker at the prevailing rate, but AIB failed to do so.  If they had done so, it would have been around 4%.
October 2014 Fixed this loan at 2.5% for three years.

I have made submissions to AIB and, I have campaigned hard on the 3.67% issue. I have argued that AIB cannot set a "prevailing rate" retrospectively.  I hope that AIB will be beaten on this, but there are two sides to the argument.

Based on AIB's interpretation of the 3.67% issue, the borrower has got a great deal on this mortgage.
Based on my interpretation, he has got a mixed deal.   Allowed out of a very expensive fixed rate without penalty.  But has been overcharged since. The extent of this overcharging reduced dramatically by the 2.5% restructuring deal. 

*Second loan *
Let's just look at the second loan to see what happened.

September 2008 drew down a mortgage at ECB +1.5%

June 2009 Fixed for 4 years at 3.57%  (ECB rate was 1% at the time, so they were paying 2.5%). They made  a decision to give up their tracker for 4 years.  There is no doubt about that. By July 2012, the ECB rate dropped to 0.75%. So they would have been paying 2.25%. Instead they were paying 3.57%. 

June 2013 - AIB did not offer them the tracker mortgage to which they were entitled.  So they were charged 4.4% instead of 2%

October 2014 - AIB reduced the rate to 2.5% - but they should have been paying just 1.5%.

There is no doubt that AIB made a mistake and should have given the borrower a tracker at ECB +1.5% in June 2013.  So they were overcharged by 2.4% for 15 months. From October 2014 to, say October 2016, they have been overcharged by 1%.



odonoghe said:


> They have subsequently offered us redress and compensation on this loan back to the original fixed date in June 2009,



I have no idea why AIB is doing this. They are giving them retrospectively a tracker at about 2.25% instead of 3.57%. So they are getting back 1% plus for 4 years.

That is more than fair.

*The loans combined *

This borrower has a lot less to complain about that most other borrowers.

Brendan


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## mister32 (25 Jan 2017)

I still think you're overcomplicating the matter.

Particularly from a consumer protection perspective.

The second loan still not on tracker.

But should be.


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## Brendan Burgess (25 Jan 2017)

Hi mister

I thought I had simplified it by splitting them into two.




mister32 said:


> The second loan still not on tracker.





odonoghe said:


> In the interim in August 2016 AIB wrote to us regarding redress on the loan which had commenced life as a Tracker in 2008. They have subsequently offered us redress and compensation on this loan back to the original fixed date in June 2009, .... This loan is now back on the rate of ECB + 1.5% margin, where it commenced.



They have got their tracker back at 1.5% on the second loan.

But you probably mean the first loan? (My layout was confusing and I have fixed it now.)  AIB is charging them 2.5% at present. AIB could give them back their tracker at 3.67%.  They would be foolish to take that.

Brendan


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## mister32 (25 Jan 2017)

I think I follow

But it's not really about the differential

I agree they are more lucky than most

But in principle they should have the proper rate tracker

How can Aib defend that

The margin does not change

Both started same time

Aib dancing around because they knows they are in the wrong

By the way how to qualify for reduced interest? That's great idea


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## Brendan Burgess (25 Jan 2017)

mister32 said:


> But in principle they should have the proper rate tracker
> 
> How can Aib defend that
> 
> ...



He took out a cheap tracker on half the mortgage. 

He took out a fixed rate on the other half. They, at their discretion, allowed him to switch from a fixed rate without penalty to a variable rate. They did not allow him to switch to a tracker and of course they were not obliged to. He could have refused the variable rate offer and stayed on the fixed rate. 

The fixed rate entitled him to a tracker mortgage on conclusion of the fixed term "at the then prevailing rate." His main dispute should be the definition of "then prevailing" . But unfortunately he stormed off in a huff when we tried to give him balanced advice. 

Brendan


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## mister32 (25 Jan 2017)

I still say in light of the behaviour of the banks towards tracker customers this is an example of sharp practice


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