Liam Croke: Check the small print, it might work for you

About three months ago, I was asked by the managing director of a company in Dublin to meet with a senior manager of at the company, which we work with, because this woman had an issue with her mortgage.

About three months ago, I was asked by the managing director of a company in Dublin to meet with a senior manager of at the company, which we work with, because this woman had an issue with her mortgage.

He wasn’t quite sure what the problem was, but it must have been serious if she had reached out to him for help.

Anyway, to cut a long story short, I met with this woman and she outlined what her problem was. It came down to two things: height and space. She had bought a three-bedroom apartment in Dublin, near Croke Park back in 2006 for €550,000 and secured a mortgage for €500,000 over a 30-year term. 

She really likes the apartment, has nice neighbours etc. but two children later, she is running out of space and would like to either sell the property or rent it out. She wants to move to a property that is bigger but, most of all, has a back garden

I am digressing a little here but I wanted to give you some background on why she was looking for help in the first place. Little did she or I know what we were going to encounter over the next three months.

I initially had some bad news for her because the only way she could move was if she was going into rented accommodation herself. She had no savings, her mortgage was costing her €2,500 per month because she was on a variable rate with her lender (interest rate 4.5%).

Her mortgage repayments, child care costs and so on meant there was little if anything left over each month to save and given that one of the minimum requirements to qualify for a mortgage was having savings to use towards the purchase, it was ruling her out.

When I told her the bad news it only confirmed what she probably already knew. I guess she was holding out for some glimmer of hope but that was now dashed.

Her only hope of bringing up her children in a different environment would have to be renting – and given the lack of suitable and affordable property available it was likely that she, her husband and kids would have to remain in the small, fourth floor apartment for the foreseeable future.

She had brought her mortgage documentation with her when we met and before we parted I asked her if I could have a quick look at it. I don’t know why I asked her, as it had no real relevance to the conversation we just had, but I asked to see it anyway.

I don’t think she wanted to bring it to my attention or make reference to it, because back in July 2008, she changed her repayments from variable to fixed. The reason for this was because the previous couple of months, interest rates had increased and she was worried that they would continue to rise until they became unaffordable.

So, she opted to fix her mortgage for five years at 5.95%. About four months after she fixed the interest rate, rates tumbled.

“I know,” she told me, “how stupid a decision was that?” She tried to get out of the fixed rate when rates went down but her lender was going to charge her a penalty of about €23,000 to do this and of course she didn’t have that.

By the way, over those five years I calculated that she paid back circa €44,000 more by opting for that fixed rate than she would have if she had stayed on the variable rate.

But anyway, something caught my eye when I was flicking through her mortgage documents – the initial letter of offer in particular.

What I saw was that she had signed up to initially was a tracker variable rate, not a standard variable rate – and we all know how different both are.

When she chose the fixed rate, and when that expired, the lender never gave her an option of choosing a tracker rate, they only offered a standard variable or fixed rate.

And it clearly said in her offer letter, under general terms and conditions 3.2 FURTHER FIXED INTEREST RATE OPTIONS/CHOICES, she had the choice of either:

1. Another fixed rate

2. Conversion to a variable rate

3. Conversion to a tracker rate

When her fixed rate expired they had to offer it to her but of course they didn’t, so she ended up paying circa €808 more each month over the last three years than she should have had to.

There were months when she had nothing left in her account, there were nights she lay awake unable to sleep worrying about the safety of her kids and worrying about how she ever would be able to save any money any more – and all the time she was paying €800 more than she needed to.

I told her, without getting her hopes up, that she may have a case with her lender and I was happy to contact them if she wanted me to.

Of course she did and when I spoke with her lender they tried everything they could to deny they acted inappropriately and said she didn’t have the right to a tracker mortgage, when clearly she did.

They didn’t have a leg to stand on. They were just trying their luck, hoping I would go away. They choose this strategy with non-financial people, where the majority do give up, but I wasn’t going anywhere. Fast forward 12 weeks and her lender has now amended her mortgage account to a tracker rate and her savings account was given a welcome boost when she received a cheque back from her lender in the amount of €33,088 to compensate her for the amount she overpaid them for the past three years. Thankfully that dream of having a back garden for her kids might not be just a fantasy anymore. She has already started house hunting!