My bank is ripping me off with my mortgage rate

This e-mail came through last week regarding someone who’d fixed their mortgage rate last July and now feel they are overpaying:

I dont know if you can help or if i am onto the right people but i have a mortgage with ics and last july i signed a form to hold for a number of years at 6.05 percent, i was serving in chad with the army and was home on leave so my own fault for not realising what was the state of play with the world ecomany, but doid not ther banks and mortgage people not know what was happening and not have being offering rates when they had to be aware of what was going to happen, and were just compiling or catching coustomers unaware when they in the buesiness should know

On a number of fronts, this is a pretty unpleasant situation to be in. I’ve written before about the issues raised recently regarding people who are in fixed rate mortgages at the moment when interest rates are falling dramatically. The short answer is, unfortunately, tough luck. If interest rates had gone the other way  you’d be quids in on your gamble.

My response covers a couple of items:

You raise an interesting issue. I’m sure if you checked out with your mortgage provider they’ll tell you that no one could have known back in July what interest rates were going to do nearly 12 months later.

They’re likely to tell you that rates could just as easily have gone up as gone down.

That said, banks will always charge more when people want to fix their interest rates for a longer period of time – you pay extra for the privilege of the certainty of knowing what the rate will be for the longer term.

The organisation that you could follow up with further if you do want to lodge a complaint would be the Financial Services Ombudsman (www.financialombudsman.ie/).

However, before going to them to complain, you will have to lodge a complaint with your bank first, and follow that through to completion, before going to the Ombudsman.

I think however, based on your e-mail, you know the final outcome here when you mention it maybe being partly your own fault.

I think that one thing that this has pointed out is that we should all be more aware of the fact that the banks are only there to make money for themselves – not to keep the country going, or to facilitate the rest of us to buy houses or even hold our money for us.

The primary responsibility of a bank is to its shareholders to make money, and if they can do that by selling mortgages at 6% when the rates are just over 1%, then they’re technically doing their job very well.

I’m sorry I can’t be more positive in my response, but it looks to me like a potential no-win situation. If you feel something more sinister went on (i.e. mis-selling) then you should definitely begin the complaints process.

3 Responses to My bank is ripping me off with my mortgage rate

  1. Colm May 1, 2009 at 05:43 #

    I was serving my nation and didn’t realise what I was signing.

    You were happy enough to accept 6.05% thinking interest rates were going to spike and you would be laughing. Imagine you’re response if interest rates had spiked to 12 or 13 % and the bank came to you and said Oh we’re sorry we were too busy doing something else and this just isn’t fair please leave us out of the legally binding contract we both signed in good faith and allow us take more money from you. I suspect your response would be something similar to the response of the bank at the moment.

    The lesson is if you are going to enter into major financial committments then make the time to research the full economic implications and get advice. I know soldiers in Chad have access to the internet. Many of them watch RTE on slingbox over the internet to kill the boredom between camp duties and patrols. Perhaps you should have switched off Fair City and done some research.

  2. paddy9 May 1, 2009 at 12:28 #

    Hi VI,
    Is this statement not way out of date?
    “The primary responsibility of a bank is to its shareholders to make money”
    The banks have already killed their shareholders.
    The banks are now effectively financed by the taxpayer. The are been financied by your letter writer.
    He has aright to expect that new rules will apply.

    You need to updated the old mantra to reflect the new order.

  3. valueireland May 7, 2009 at 20:09 #

    @Colm – Your reference to the “major financial commitment” is pretty much the nub of the issue. Everyones desire to own a home (proportionally greater in Ireland than anywhere else) meant that getting on the property ladder became the immediate priority rather than considering what’s potentially down the road.

    You’d wonder where the “stress testing” that banks were supposed to be carrying out went? But we know the answer to that, I guess 🙂

    I actually heard a journalist on the radio today saying “who knew rates would go so low”.

    @paddy9 – Unfortunately, my statement isn’t a mantra and it isn’t out of date.

    If we had a proper Office of the Director of Corporate Enforcement who enforced company law, that particular law should be the first one to be dusted off and used to analyse the behaviour of the banks in during the Celtic Tiger.

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