Court of Appeal finds borrowers gave up right to a tracker rate when they moved to a fixed rate
The bank had lost in the High Court when it challenged a decision of the Financial Services and Pensions Ombudsman that the borrowers should have been able to revert to a tracker mortgage after switching to a fixed-rate deal that subsequently expired.
Now the three-judge Court of Appeal has found in favour of the bank, ruling that the inclusion of a tracker-style rate in the borrowers’ original mortgage contracts, lasting the life of the loan, was essentially voided when they opted to move to what was an attractive fixed rate at the time.
“These complainants gave up their contractual right to a ‘tracker rate’ when, having agreed to a variation in their mortgage contract, they moved to a fixed rate,” the Court of Appeal ruled.
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“Unfortunately for these complainants, when they moved to the fixed rate in May 2007 there was no provision in their contract that their default interest rate would be a tracker rate. Rather, the contract provided [that] at the end of the fixed-rate period they were offered a range of options of ‘alternative available products’ which did not include a ‘tracker rate’ as this was no longer available from the bank.”
More than 40,000 cases of overcharging by banks was discovered when the Central Bank oversaw an industry-wide examination of tracker mortgages between late 2015 and mid-2019.
About 5,300 loan accounts may be affected by the Court of Appeal ruling, Ulster Bank has previously said.
The borrowers whose mortgage is at the centre of the case were not among the large number of mortgage customers who were found to be entitled to compensation under the Central Bank’s tracker-mortgage redress process, but the financial ombudsman had found in their favour.
Ulster Bank challenged the ombudsman’s ruling in the High Court, which last year dismissed the bank’s appeals.
The case relates to two sets of borrowers who, in 2006, signed a so-called flexible mortgage transfer form, entitling them to move on to a tracker loan.
When European Central Bank rates were rising, in mid-2007, they applied to fix their interest rates until August 2010.
After the fixed-rate period, the borrowers sought to revert to their previous tracker rate, but the bank refused as it had stopped offering the product to new customers in 2008.
In her ruling last June, Ms Justice Bolger said the bank never explained that the tracker rate might not be available when the fixed-rate period ended. The ombudsman was entitled to decide that the borrowers’ contractual entitlement to the tracker rate continued at the time they opted to fix their rate, she found.
However, the Court of Appeal has ruled that the complainants gave up their contractual right to a ‘tracker rate’ when, having agreed to a variation in their mortgage contract, they moved to a fixed rate.
The Court of Appeal said the High Court “ought to have carried out its own analysis of the contractual documents and did not owe the ombudsman any deference in this regard”.
Ulster Bank, whose last CEO here was Jane Howard, has now exited the market in the Republic of Ireland but was fined €38m in 2021 for what the Central Bank found were regulatory breaches involving tracker-mortgage customers.
