EBS What does an EBS "Variable Base Rate" mortgage mean?

[B26354]

And then in 2008 they realised they had to “shift” everyone onto a variable/SVR? This is taken from the EBS 2008 annual accounts. This is at odds with what Dara Deering said a year earlier.

 

[RAzvan R]

Razvan-I understand what you mean. So they just called it a “variable” rate between 2008-2010 and then it became an “SVR” in late 2010? I think it may actually have been early 2007 when they released a new “variable” rate that was different to the tracker. I’ve attached this image from January 2007 that describes a “new” SVR in the article but by your reckoning EBS systems called it a “variable rate.”

So “New” suggests no SVR/Variable Rate product for new EBS customers between 2004 & early January 2007?

By that reasoning the majority of new customers who took out a loan with EBS between 2004 to early 2007 could be entitled to a tracker if that variable base rate was used??Those who also took out loans between 2007-mid 2008 had contracts with same terms used e.g. variable base rate.

No wonder they are fighting this. That would be thousands of accounts.

Exactly, thats the problem.
Every single customer from 2004 to late 2008 (when the Tracker was removed) who have the term Variable Base rate in their contract is actualy a Tracker rate.
Why?
Because not a single contract from that time frame includes SVR only Variable Base which was Tracker set at specific indices/margins.
That will set AIB profit for first quarter of 2018 to break even plus pachet expences.
If it was only one person afected I will Say that did not understand but when are thousands of people with the same issues is completly diferent even for the Central Bank

 

[B26354]

So there are only 2 groups of new EBS customers between 2004-2007/2008:
1. Tracker defined in loan offer as “Variable ECB base plus margin”
2.Fixed to roll onto tracker defined as “Variable Base”

 

[RAzvan R]

Razvan-I understand what you mean. So they just called it a “variable” rate between 2008-2010 and then it became an “SVR” in late 2010? I think it may actually have been early 2007 when they released a new “variable” rate that was different to the tracker. I’ve attached this image from January 2007 that describes a “new” SVR in the article but by your reckoning EBS systems called it a “variable rate.”

So “New” suggests no SVR/Variable Rate product for new EBS customers between 2004 & early January 2007?

By that reasoning the majority of new customers who took out a loan with EBS between 2004 to early 2007 could be entitled to a tracker if that variable base rate was used??Those who also took out loans between 2007-mid 2008 had contracts with same terms used e.g. variable base rate.

No wonder they are fighting this. That would be thousands of accounts.

They called it Variable Base from 2004 until AIB was taking over.
Then AIB transfer their policy statetment of SVR to EBS.
Today I received a statetment and where is mention “ All Variable rate customer see insert” and is nothing attached to it or any description.
Weird.

 

[RAzvan R]

So there are only 2 groups of new EBS customers between 2004-2007/2008:
1. Tracker defined in loan offer as “Variable ECB base plus margin”
2.Fixed to roll onto tracker defined as “Variable Base”

1. Variable Base rate + ECB margins.
2.As above including preavailing Variable Base with no margins specified.
3. All the customers with Variable Base rate without margins specified.
From 2011 onwards I dont have a clue what it is or what is call but I presume is SVR as per AIB.
Now I hope everybody understand.
Finaly we are on the same page.

 

[B26354]

1. Variable Base rate + ECB margins.
2.As above including preavailing Variable Base with no margins specified.
3. All the customers with Variable Base rate without margins specified.
From 2011 onwards I dont have a clue what it is or what is call but I presume is SVR as per AIB.
Now I hope everybody understand.
Finaly we are on the same page.

This is what option 1 looks like. Option 2 doesn’t include “interest rate basis” section on loan offers.

 

[RAzvan R]

This is what option 1 looks like. Option 2 doesn’t include “interest rate basis” section on loan offers.

@B26354, @Bikini Widow,
You have to see this: received from EBS 15.02.18

First picture: there are 2 diferent rates Variable & SVR, corect?
Second picture: Variable/Tracker rate exactly the same way it was from 2004 onwards until AIB implement heir policy statetment.
Should mention Variable or Tracker rate to diferentiate, but because it was the same think they put Variable/Tracker.
@gnf_ireland, @RedOnion Can you please give us an expert opinion based on the details from the pictures?
Thank you.

Regards,
RazvanR.

 

[B26354]

@B26354, @Bikini Widow,
You have to see this: received from EBS 15.02.18

First picture: there are 2 diferent rates Variable & SVR, corect?
Second picture: Variable/Tracker rate exactly the same way it was from 2004 onwards until AIB implement heir policy statetment.
Should mention Variable or Tracker rate to diferentiate, but because it was the same think they put Variable/Tracker.
@gnf_ireland, @RedOnion Can you please give us an expert opinion based on the details from the pictures?
Thank you.

Regards,
RazvanR.

I have seen both trackers & SVR’s advertised on EBS online pages between 2004-2008. However there isn’t a lot to differentiate between the tracker rate & variable rates at all in EBS contracts between 2004-2008. I’m open to correction but I haven’t seen any EBS loan offers between 2004-2008 that contain the word “tracker” or “standard variable rate.” But both the fixed rate & tracker products involve loan offers/contracts that reference the word “variable.”

The main difference between these contracts is that the tracker product includes the “interest rate basis: (Variable ECB Base +1.25%)” term while the fixed rate contract does not include the “interest rate basis” term and only references the interest rate “variable base rate” term. So a reasonable question to ask EBS is what is the interest rate basis on the variable base rate contracts and why is it included in tracker contracts but not in the fixed/variable base rate contract? Funnily enough the interest rate basis used to be referenced in the older version of the EBS fixed rate application (see attached) instead of the “applicable variable rate then prevailing” term now used in the fixed rate application. It also states in that document that the “variable interest rate basis will be specified in the loan offer by EBS.”


And another observation: the ECB changed their rates by .25 on multiple occasions between 2004 & 2008 and all of the variable base rates mirror this change e.g. 4.00, 4.25, 4.50, 5.00 etc. It was only in mid 2008 that the “variable base rate” started to numerically look like a traditional SVR decided by the lender e.g. 5.33 or 5.88.

 

[haveaniceday]

Hey There - I don't think EBS actually used the term 'SVR' on their website until late 2008 or even into 2009 - tho they did show two Variable rates - one being tracker homeloan and one just variable?

 

[B26354]

Hey There - I don't think EBS actually used the term 'SVR' on their website until late 2008 or even into 2009 - tho they did show two Variable rates - one being tracker homeloan and one just variable?

EBS did use the term SVR on their webpages(I’ve attached an image from 2005.) However I haven’t seen any evidence that they used the term SVR (or tracker) on their loan offers/contracts between 2004-2008. We now know that they use the phrase “variable” in tracker loan offers and in fixed to variable(tracker) loan offers. No sign of SVR anyway.

The variable base for most of the new EBS mortgages during this period appears to be ECB base rate plus the margin(usually 1.25%). During this period they did advertise SVR rates that differed significantly from the variable base rate plus margin e.g. March 31st 2007 SVR rate of 3.25%. Confusingly they also advertised a 3.25 % tracker rate in January 2007 which makes no sense as the ECB base rate at that time was 3.50% (see image attached).

Anyway Tonymac, the opening poster on this thread, took out an EBS fixed mortgage in May 2007; this fixed mortgage (at 5.14% for 3 years) was to roll onto the variable base rate of 5.00% which again is the ECB + 1.25% at that time. I’m assuming Tonymac received his loan offers throughout April & May 2007 yet he didn’t take the very attractive SVR that was on offer and this SVR does not appear in his fixed term loan offer as the rate he would roll onto after 3 years. Surprise surprise.

I also had another look at the EBS fixed rate application form from 2007 & it says that the “variable interest rate basis will be specified in the loan offer issued by EBS.” (See attached). I can’t find this “variable interest rate basis” anywhere in my fixed term loan offer but it is specified on tracker loan offers as “Variable ECB base + 1.25%.” I’m sure Paraic Kissane and the Central Bank will be asking EBS why the “interest basis” is not included in these fixed rate loan offers but they are referenced in the fixed rate application form & on tracker offers during this period. I’d say they will also ask EBS if the “interest basis” had been included in the fixed rate loan offer between 2004-2008, what would it have been??
I think I know the answer.

 

[gnf_ireland]

@gnf_ireland, @RedOnion Can you please give us an expert opinion based on the details from the pictures?

Firstly @RAzvan R I am in no way an expert opinion. I am simply someone commenting on this with a more neutral set of eyes. Sometimes when you are in the middle of something its hard to see the wood from the trees so to speak. Sometimes its good to see a different view on the same topic - but you all are welcome to discard it as it is just my personal view and nothing more.


Regarding the two images you have shown, I cannot see anything wrong with either of them. One talks about a LTV variable rate and potentially moving to SVR and the other is talking about moving from a fixed to a variable rate.
I have said this repeatedly - there can be more than one variable rates out there at a given point in time. Most banks have multiple; and some have lots

The main difference between these contracts is that the tracker product includes the “interest rate basis: (Variable ECB Base +1.25%)” term while the fixed rate contract does not include the “interest rate basis” term and only references the interest rate “variable base rate” term.

Yes, one clearly calls out an offset from the ECB rate and the other does not.
"Variable ECB Base + 1.25%" is not the same language as "Variable Base Rate (currently 5.25%)"
Why was different language used here ? Who made this decision and did anyone every question it ?

And another observation: the ECB changed their rates by .25 on multiple occasions between 2004 & 2008 and all of the variable base rates mirror this change e.g. 4.00, 4.25, 4.50, 5.00 etc. It was only in mid 2008 that the “variable base rate” started to numerically look like a traditional SVR decided by the lender e.g. 5.33 or 5.88.

And with the best will in the word this is just an observation. At the time the banks were selling both variable and tracker mortgages they needed to be competitive on both. If the ECB moved, then all banks had to react. This is how the market works when high competition exists.
From mid-2008 onwards, things had changed - the competition was not there and the banks were in survival mode. Expec.ting them to behalf in the same way as previously would be madness !!!

So a reasonable question to ask EBS is what is the interest rate basis on the variable base rate contracts and why is it included in tracker contracts but not in the fixed/variable base rate contract?

Exactly - you all need to find out what was the interest rate basis, and find a way to prove it means what you want it to mean.
I keep saying this - there is too much focus on this thread around SVR. The issue is not SVR, the issue is "does variable base rate mean a tracker and if so what is the offset to ECB" This is what you have to prove - nothing else
A variable rate is simple a rate that is not fixed and can fluctuate. A tracker rate is a variable rate that tracks some external index by an offset.
A tracker rate is a variable rate, but a variable rate is not necessarily a tracker rate.

took out an EBS fixed mortgage in May 2007; this fixed mortgage (at 5.14% for 3 years) was to roll onto the variable base rate of 5.00% which again is the ECB + 1.25% at that time. I’m assuming Tonymac received his loan offers throughout April & May 2007

Please forgive me for stating your line above - "variable base rate of 5.00% which coincidentally calculates as ECB + 1.25% at that time - the same as the tracker rates offered by EBS at the time."

No one is doubting the confusion here and no one is doubting your commitment to the issue, but you all need to take the circumstantial evidence away and come up with the proof that variable base rate = tracker. Its easier said than done, but the same discussion is being repeated on SVR, how variable base rate happened to calculate as ECB+1.25% etc etc etc.
If it was that easy, then the CB would have included it in cohort to date.

 

[B26354]

Good to see some of the arguments being challenged by GNf_ireland.

Firstly, the reason why the SVR is being mentioned repeatedly is because EBS are saying the Variable base rate is SVR. Stands to reason that posters will therefore try to demonstrate how it’s not an SVR & if it’s not an SVR then what is it?

The CB are reviewing this cohort too.

And finally..the fixed rate application form that was completed by variable base rate customers refers to “interest rate basis specified in the loan offer.” This interest rate basis is included in tracker loan offers but is not actually specified in the fix rate loan offers and it only states : “after 3 years: Variable base rate (currently 5.25%).”

Therefore EBS will have to answer question as to what the interest rate basis was for these loans between 2004-2008.
Gnf_ireland: I’d be interested to know how you think EBS might respond to that question.

 

[gnf_ireland]

because EBS are saying the Variable base rate is SVR. Stands to reason that posters will therefore try to demonstrate how it’s not an SVR & if it’s not an SVR then what is it?

I am sure we can agree that the variable base rate is a variable rate? If it is the standard rate issued at the time to all customers, then they have an argument that it is the "standard variable rate". Whether it was the standard variable rate as we all know and love or just a standard 'variable rate' may be open to discussion. If it has not been defined anywhere in any documentation, and it was the standard rate they offered customers - its all about the legal play on words. Sadly when something is not clearly defined, it is all down to interpretation and the only one that counts is the legal one

The CB are reviewing this cohort too.

Yes they are, but if I am being honest I would guess the wind has been taken from the CB sails and doubt any more major groupings will be included without a legal case. The best thing they can do is to agree with the bank to take one sample case and if successful, include the others by default

Therefore EBS will have to answer question as to what the interest rate basis was for these loans between 2004-2008.
Gnf_ireland: I’d be interested to know how you think EBS might respond to that question.

The answer to that one is simple - 'market forces/conditions' and/or 'cost of funds' which at the time tracked very closely to ECB but there was no commitment to track it. This was the same as other banks given the level of competition in the market at the time.

BTW for the record, I would prefer the concept of variable rates to be removed forever from the Irish mortgage market and everything to either long term fixed at reasonable rates or some baseline outside of the banks control - whether it be ECB, EUIBOR, average cost of funds for Irish banks, average mortgage prices etc - but something that goes not leave the customer powerless at the hands of a bank to huge increases in mortgage rates.

 

[B26354]

The answer to that one is simple - 'market forces/conditions' and/or 'cost of funds' which at the time tracked very closely to ECB but there was no commitment to track it. This was the same as other banks given the level of competition in the market at the time.

Thanks for reply Gnf. Perhaps my question was poorly worded but
I’ve never seen these terms you mention used in a loan offer. That sounds like a retrospective explanation and not an actual interest rate basis included in a loan offer at that time (2004-2008). Remember the fixed rate application form clearly states there is an “interest rate basis specified in loan offer” except it’s not included. In the tracker loan offers it does specify the interest rate basis as “variable ecb base + 1.25%.” So how would the interest rate basis be defined in the fixed rate contracts? That’s the question EBS will have to answer as the fixed rate application form signed at the time says its specified in the loan offer.

 

[gnf_ireland]

I’ve never seen these terms you mention used in a loan offer. That sounds like a retrospective explanation and not an actual interest rate basis included in a loan offer at that time (2004-2008).

Back in 2004-2008 the banks were under no formal obligation to report how their variable rates were calculated. They were simply variable and could change "at the banks discretion". However, the cost of funds was always a consideration with how banks used to price mortgage rates. Is it defined anywhere in the loan agreement - absolutely not, but it does not have to be either

Remember the fixed rate application form clearly states there is an “interest rate basis specified in loan offer” except it’s not included.

I would be very surprised if the loan agreement did not state that variable interest rates can change at the banks discretion. It may not define the exact phrase, but I would define what a variable interest rate is.

In the tracker loan offers it does specify the interest rate basis as “variable ecb base + 1.25%.”

Absolutely - all tracker rates should state the item they are tracking and the offset to this tracker. Without it, its not a tracker. Remember AIB retrospectively put customers onto a tracker who did not have an offset stated on their mortgage and the offset used was ECB+3.69%. The offset is the key element in any tracker discussion

So how would the interest rate basis be defined in the fixed rate contracts?

It says "variable base rate" - there is a lot of focus on the word base here. If it said variable rate would you accept that it was not a tracker but the banks default variable rate?
While I understand what the ECB Base rate is, I cannot see any clear definition in the Oxford Dictionary on this
https://en.oxforddictionaries.com/definition/base
The closest I can come is
VERB
[WITH OBJECT]

• 1 (base something on) Use (something specified) as the foundation or starting point for something.
  
  ‘the film is based on a novel by Pat Conroy’
  
  ‘entitlement will be based on income’

So if you use this definition you are saying the variable rate has to be linked to something, and the rate quoted 'variable base rate' is the starting point for this linkage. While the use of base is strange, it is no different in my view to the use of standard. I would read that as the banks 'default' variable rate - with the base rate and default rate being the same thing. In my view it simply cannot be a tracker because no offset is clearly stated, and the item being tracked is not understood

It has been stated a number of times on this thread that the banks variable rate was kept in mind with the tracker rates for the period of time in question. The value listed on the fixed home agreement is the rate that matches both, BUT in reality the variable one is the one it applies to as there is no ECB+1.25% as in the tracker mortgage. This is what makes it a tracker mortgage.

We can go around in circles on this, but the bank was not obliged to state the factors or basis for the determination of variable rates until very recently and even then they are rubbish to be honest.

That sounds like a retrospective explanation

To be fair, I think most of this is a retrospective conversation. No one appears to have raised the definition of variable base rate with EBS before they signed the home loan and while I can accept the use of the work base is not clear, the fact that a tracker clearly requires an offset to be listed and none is listed. I also struggle to understand how brokers would not have pointed this out (if they looked through the detail of the mortgage agreement) and the solicitors for that matter.

 

[B26354]

Thanks for the reply Gnf.

You didn’t answer my question though (“So how would the interest rate basis be defined in the fixed rate contracts?”) and I don’t know how I can possibly make the question clearer for you.

Remember EBS confirm in the fixed rate application form that the interest rate basis is specified in the loan offer(but it’s not!!) so they were and now are under obligation to define it. The loan offer only includes the term “after 3 years: variable base rate (currently 5.25%).” This is not the variable interest rate basis.

Your also right about us going round in circles; I’m having that experience with someone else too!!

 

[gnf_ireland]

The loan offer only includes the term “after 3 years: variable base rate (currently 5.25%)

This is not the variable interest rate basis.

Remember EBS confirm in the fixed rate application form that the interest rate basis is specified in the loan offer(but it’s not!!)

Does the EBS homeloan define the interest rate basis for a variable rate, or define what a variable rate is?

I think the issue is you are looking for a clear definition of "variable base rate" on the mortgage agreement and its not there. We all accept this. The question is what interest rates are defined in the mortgage agreement - likely to be fixed rate, variable rate and tracker rate.

I don’t know how I can possibly make the question clearer for you.

I don't know how I can be any clearer either. You are looking for a definition that does not exist, but not willing to accept that there is a reasonable chance that 'variable base rate' is simply just a sub-category of variable rate, which is highly likely to be defined in the mortgage agreement.

If 'variable base rate' was defined in the mortgage agreement, we would not be having this conversation. If you had queried what "variable base rate" meant in 2008, we would not be having this agreement. If you had insisted that the rollover rate should be "ECB + 1.25%" in 2008, we would not be having this conversation.

I fully accept that you are frustrated that 'variable base rate' is not defined in the mortgage agreement. But you are also unwilling to accept that it is very possible that 'variable base rate' could simply be a 'variable rate' which is more than likely defined in it. I don't have access to your mortgage agreement so cannot comment either way.

Your also right about us going round in circles; I’m having that experience with someone else too!!

Fully accept this, and do believe this conversation has reached its natural conclusion. At this stage you really need to engage with some professional experts and see where it leads.
I would like to wish you all the best in your endeavours and looking forward to the day you come back and say you have been successful in your claim. But, if you are to be successful, it will be hard won but I am sure you are up for the fight. Good luck in the battle ....

 

[RAzvan R]

@gnf_ireland, @B26354, Thank you Both for your neutral answer.
For me sound like an expert, anyway.
I have one last question to close the circles.
As per Tracker form picture bellow on paragraph 4, why is mention that you can change to Fix rate or SVR on one ocasion.....
Why is not mention in Tracker form that you can change to Fix rate, SVR and Variable Base on one ocasion?
For me the answer is simple.
Because the Variable Base was the Tracker rate.
EBS did not use the term Tracker in the loan offer/contract because their IT/Computer system does not include this terminology.
They use the term Tracker only in the aplication form, advertising or just to highlight the curent Tracker rates available on different LTV’s at different dates.
All the Tracker contracts from 2004 to & including 2008 have the wording Variable Base mentioned.
The Fix rate form condition also include the term Variable Base prevailing Not SVR prevailing.
For me is more than clear that the Variable Base was the Tracker rate.

 

[gnf_ireland]

For me sound like an expert, anyway.

I can repeat, I am far from an expert. It would be very beneficial if you could get someone who worked as a broker in the past, or better again in the banking sector to give their thoughts on this. For the record, I have never worked in banking or mortgage lending or any kind !!!

Why is not mention in Tracker form that you can change to Fix rate, SVR and Variable Base on one ocasion?
For me the answer is simple.
Because the Variable Base was the Tracker rate.

Or taking a completely different view - the variable base was the SVR so no need to mention it twice !!
I don't know the answer to this, so it is something you will have to get some professional advice on

EBS did not use the term Tracker in the loan offer/contract because their IT/Computer system does not include this terminology.

The variable base rate definition was primarily used as the rate that a fixed rate rolled onto. However, EBS loan offers that started off on a tracker included definitions such as:
“Interest rate (Variable): 5.25%
Interest Rate Basis: Variable ECB Base + 1.25%”

I cannot confirm or not whether EBS used the word tracker in the ICT systems or not, but they have clearly used Interest Rate Basis on a tracker mortgages as "Variable ECB Base + 1.25%". This is very clear in that it is tracking something and has a clearly defined offset against it.

Rightly of wrongly the same does not exist when the term "variable base rate" is used
If I read this line “Interest rate after 3 years:Variable Base (Currently 05.25%)”, I am reading it that the interest rate is variable and that variable interest rate is currently set to 5.25% but subject to change in the future. I will be honest and admit I have no idea what 'base' means here, and I would be likely to query it as I don't like signing stuff I don't understand. But I will also accept that I was 34 when I signed my first mortgage agreement and not 24 like some of you were likely to be.

All the Tracker contracts from 2004 to & including 2008 have the wording Variable Base mentioned.
The Fix rate form condition also include the term Variable Base prevailing Not SVR prevailing.
For me is more than clear that the Variable Base was the Tracker rate.

You have me until the last line. This is where I think you are taking a massive jump without sufficient support on this. For you it is clear - I fully accept that. I cannot say the same thing from my point of view.
I will repeat again, a tracker rate has to track something and have an offset to that rate. The variable base rate has neither, and this is where the argument falls down. If the line had said “Interest rate after 3 years:Variable Base (Currently ECB + 1.25%)”, I would be whole heartily in agreement. My issue is the two lines below are fundamentally different and you have not sufficiently proved why they are the same, but rather provided an opinion on it:
Interest Rate Basis: Variable ECB Base + 1.25%”
Interest rate after 3 years:Variable Base (Currently 05.25%)
I would love to agree with you that you have convinced me, but sadly I am not convinced.

I will add that post 62 with the definition of Variable Base is something that you can bring to the table in the discussion.


Finally on this one, something that may help you support you case is if you can find someone who fixed in 2005 for 2 years and came off the fix period BEFORE the removal of the tracker mortgages - assuming their fixed document includes the phrase "variable base rate". If you can get access to the initial letter they were issued when the fixing period was coming to a close outlining the options to them, and more importantly what was the DEFAULT option if they done nothing. It is important to be able to clearly tell if that customer was defaulting onto a tracker (ECB + offset) or a variable rate (not ECB + offset mentioned). This may make or break your case, if you can get someone to provide this detail to you. Then again I have no idea how many customers fixed for 2 years in 2005 .....

 

[RAzvan R]

I would be very surprised if the loan agreement did not state that variable interest rates can change at the banks discretion. It may not define the exact phrase, but I would define what a variable interest rate is.

In the EBS Terms & Condition is mention that their rate is link to an index or indices.

Thank you for your support @gnf_ireland
and apologies for questioning you.
I believed that, overall our conversation was covering every angle being informal, neutral, direct & indirect impact as per customer view and for the legal aspect we will leave Padraic Kissane along with Central Bank to deal with To Be Or Not To Be Variable Base Tracker.
Thank you.
Regards,
Razvan R.