Ulster bank has miscalculated the repayments on trackers for years. Now it's AIB's problem

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Salvadore

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Mods note: Clarified here:

Clarification of the Ulster Bank to AIB repayment calculation issue

Here is the statement from AIB •AIB is working to resolve queries raised by some customers whose tracker mortgages moved to AIB as part of AIB’s recent purchase of Ulster Bank’s mortgage book. The queries arose following a letter issued after the July ECB rate increase, resulting in customers...
www.askaboutmoney.com


My mortgage recently transferred automatically to AIB.

It’s a tracker mortgage (ECB + 0.85%). Increases of 0.25% have resulted in a monthly payment increase of just 4 euro a month.

The latest notification of an ECB increase has, for the first time, come from AIB. Notwithstanding that the increase is again just 0.25%, apparently it will require a monthly repayment increase of a whopping 115 per month.

On querying this with AIB, I’ve been told that the sharp increase is not attributable to the ECB increase but to an issue that AIB uncovered when the mortgages were transferred from Ulster. It’s a widespread problem apparently and a significant number of mortgage holders are effected.

Apparently, AIB have discovered that in many cases, the monthly repayments are not at a level that would allow for the full repayment of the loan within the term remaining. It has therefore increased the monthly repayment amount to allow the loan to be discharged.

While I can understand this in principle, I have examined the last mortgage statement I received from Ulster. It outlines the amount outstanding, the amount I’m paying off the loan and the term remaining. I am very clearly on track to discharge the loan within the 30 months remaining so I can’t understand AIB’s position.

I believe it’s AIB’s intention to write to all effected customers to explain why they’re facing a sudden and significant increase.

I await their explanation.

Had anyone else had a similar issue? Apparently it’s only come to light in the last couple of days.
 
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Wow. That is very interesting.

It will be a big headache for AIB. And it's good that they spotted it now.

Are you sure of your calculations?

Brendan
 
This is a disgrace. Time for the Central Bank to ‘walk the walk’ in terms of culture boards, etc. What on earth are AIB thinking?

The right answer here lies somewhere between writing-off this money or extending the term of the affected loans to keep people’s repayments at the same level.

People think banks are scum, the banks claim that they’re not scum, but based on this, the leopards really haven’t changed their spots. The Central Bank need to intervene, and quickly.
 
Most of these people have very cheap trackers.
By paying less than was due they were getting a great deal. Effectively a loan at about 1%
It's not so good now as ECB rates have risen.

There is no justification for a write off.

But they should be offered a choice of extending the term or increasing their repayments.

Brendan
 
This is shocking. AIB bought these loans. That this wasn't discovered during due diligence is frankly not very believable. More likely that AIB knew what they were buying and figured they could recoup the money. Were more interested in completing the transaction.
Central bank should tell them to go sing for it.
 
Brendan Burgess said:
Most of these people have very cheap trackers.
By paying less than was due they were getting a great deal. Effectively a loan at about 1%
It's not so good now as ECB rates have risen.

There is no justification for a write off.

But they should be offered a choice of extending the term or increasing their repayments.

Brendan
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Write off No but any affected persons should take complaints to FPSO seeking significant compensation. Unbelievably lucky for some but it can be a double edged sword given some people could be close to retirement and have little means to pay off before expiry.

Extraordinary really but who would trust UB when they couldnt get their ATM machines working for years.
 
Can we get a bit of perspective here.

If Ulster Bank had charged the wrong interest rate for 10 years, then they should be allowed to charge the correct interest rate from now on. But they should not be allowed to recover the undercharged interest backdated 10 years.

But they have not calculated the interest incorrectly.

This was only a miscalculation of the repayment.

So people had a 20 year mortgage instead of the 18 year mortgage they thought they had. They have not lost out. They have not been overcharged or undercharged.


These mistakes do happen. But as the customer has not lost out, they should not be getting compensation.

However, the customer should have a choice of keeping the current repayment and extending the term or increasing the repayment and keeping the term.

This happens all the time at the instigation of the borrower.
They overpay their mortgage because they can afford to.
Or they extend the term because they are finding the level of repayments difficult.

Brendan
 
Brendan Burgess said:
Can we get a bit of perspective here.

If Ulster Bank had charged the wrong interest rate for 10 years, then they should be allowed to charge the correct interest rate from now on. But they should not be allowed to recover the undercharged interest backdated 10 years.

But this was only a miscalculation of the repayment.

So people had a 20 year mortgage instead of the 18 year mortgage they thought they had. They have not lost out. They have not been overcharged or undercharged.

The correct interest has been charged.

These mistakes do happen. But as the customer has not lost out, they should not be getting compensation.

However, the customer should have a choice of keeping the current repayment and extending the term or increasing the repayment and keeping the term.

This happens all the time at the instigation of the borrower.
They overpay their mortgage because they can afford to.
Or they extend the term because they are finding the level of repayments difficult.

Brendan
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You don't know what the issue is Brendan because AIB and Ulster Bank didn't advise people or publically comment. Customers had to ring to be told something about wrong calculations. If Ulster Bank had the wrong repayment schedule for years, then this should have been discovered during the due dilligence when AIB bought the mortgage book. There was no way that it wasn't to be honest if schedules were incorrect. And this should have been dealt with the time. Either AIB or Ulster Bank should have taken the hit to correct the accounts or customers should have been informed. And if Ulster Bank is guilty of mis calculating mortgage schedules for a number of years, they should be held answerable.

Simply changing peoples repayments without any correspondence or public admission of the issue from either AIB or Ulster Bank is scandalous and shows that as someone said above, banks have not changed when it comes to dealing with customers.
 
Brendan Burgess said:
Wow. That is very interesting.

It will be a big headache for AIB. And it's good that they spotted it now.

Are you sure of your calculations?

Brendan
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- Who spotted this now
- I do not believe that Ulster bank never spotted this.
- where are the due diligence people, did they not check when the trackers transferred
- do people in Ireland not have an amortisation table
- Ulster should be fined for this bungle
- does this just apply to trackers (I know Ulster miscalculated my loan at least 3 times, and miscaclulated one of those 3 when I asked them how they calculated the refund and compensation)
 
Brendan Burgess said:
Are you sure of your calculations?
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Well I recently received an annual mortgage statement from Ulster. It covers a 10 month period up to 21 July so I guess it doubles as their closing statement.

On further examination, the statement shows that over the 10 month period, I paid 14,000.78 off the mortgage balance in addition to 1153 in interest. It states that I have 28 months left to go (It predates the August payment which has since been made).

At the rate I’m running down the balance, I calculate it will take 29.18 payments to reach zero. At the rate I’m paying, therefore, I won’t have cleared the balance by the end of the 28 month period.

By my reckoning, there will Stuyvesant an outstanding balance of about 1700, a little more than a month’s repayment.

However, AIB indicated that my monthly repayment will increase by nearly 110 euro a month from October. By my calculations, this amounts to approximately 2600 extra over the remaining period of the loan - some 900 more than the 1700 I believe might be properly due.

I know these are relatively small amounts in the scheme of a 20 year mortgage but it’s a 50% difference in terms of what I believe is owed relative to what AIB is now telling me.

If I’m right, this is an outrage and one that will have a huge impact on borrowers that have much larger outstanding balances.
 
Also how does someone who never missed a payment and overpaid his mortgage by 50k suddenly find that his monthly repayment is going up €671 because the schedule is wrong? (Reluctant to take individual stories like this but imagine Charlie Weston verified the details). AIB are claiming that this only came to light after the July rate increase. Why that rate increase and not the others?

There is no detail here. Just letters telling some people that their repayments are going up. While other people haven't heard at all. And people are just supposed to trust them that the 'schedule is wrong'??
 
And by the way, the correspondence I received from AIB that informed me of the increase was dated 28 July. The revised rate to take account of the “error” had already been calculated and stitched in.

They therefore knew last month that this was an issue but did nothing except to try to bury the correction in the standard letter informing customers of the ECB increase.

It’s as if they believed that no one would notice. Do they really believe the public is that stupid?
 
One of the first questions I was asked by AIB on querying the matter was whether I had ever missed a payment or taken a payment break.

There was never any issue in that regard. There has never been a missed payment in almost 18 years.
 
Sunny said:
Simply changing peoples repayments without any correspondence or public admission of the issue from either AIB or Ulster Bank is scandalous
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Agree fully. They should have written to people first and told them about the problem and given the two options I suggested.

Brendan
 
Salvadore said:
And by the way, the correspondence I received from AIB that informed me of the increase was dated 28 July. The revised rate to take account of the “error” had already been calculated and stitched in.
Click to expand...

That is very poor.

We all make mistakes. When a bank makes a mistake, it should be upfront about it.

It should not have simply changed the repayments. It should have left them as they were and then notified customers.

Brendan
 
Brendan Burgess said:
How do I know that the interest on my AIB mortgage is calculated correctly? Or on my current account overdraft?

There is no reason to believe that it is incorrect.

Brendan
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There is no reason to believe that your mortgage repayment schedule is wrong either but turns out that it is. Or so they say. We still don't know how or why it only became obvious after the last increase.

This could well turn out to be something simple but again the communication and the customer care by AIB would appear to fall well short of the standards expected. If banks can't even get the most simple part of customer service correct, how do they ever expect people to trust them. Imagine the amount of meetings held in AIB on this (right up to EXCO level I would imagine) and their response was to send out generic letters to some people with no proper explanation or options for customers. They simply just increased the rate and as said above hoped people wouldn't notice.

I don't care if this only impacts people by small amounts. It is still proof that the culture in Irish Banks is still rotten and they treat their customers with contempt. Did no-one in AIB think that we need to handle this in a upfront manner? When were the Central Bank informed? Did they sign off on the AIB response?
 
You can always recalculate the interest on your mortgage long hand and I believe as Brendan does that the interest calculations will be correct. What has happened here is that customers paid less per month and hence the existing payment would not clear the loan in the remaining term of the mortgage. Effectively this means customers had a cash flow advantage over the years. There is no write off issue here. Extend the term if there is hardship. Also I think Brendan put a link up before for a mortgage calculator and you can check your own mortgage and see that your existing payment is correct.
 
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