Consumer body urges regulator to protect tracker mortgages

The Irish financial regulator has been urged to intervene in an alleged campaign by lenders to persuade customers to switch from tracker mortgages to more expensive fixed and variable home loans.

The interest rate on trackers is tied to that of the European Central Bank which makes them good value for customers, especially with the ECB reducing its rate by 0.5% in successive months.

But trackers are costly for Irish lenders which have to borrow on the interbank market at rates higher than they can charge on the loans, so they are no longer being offered to new customers.

Now existing tracker customers are also feeling the pressure, with some lenders contacting them with special offers of two-year fixed rate deals if they agree to switch. The offers have set alarm bells ringing at the Irish Consumers’ Association, which has called for the intervention of the regulator.

In a letter to the regulator, association chairman James Doorley asks that he “seek written confirmation from all regulated lenders that they have not tried, and will not try, to entice borrowers from tracker mortgages to more expensive fixed or variable loans”.

The letter also demands that customers as well as banks should be consulted.

The association warns that any lender engaging in such tactics would have breached the consumer protection code and should face “certain, swift and severe punishment”. It also warns consumers to be careful of “special deals, attractive offers or short-term inducements” that will cost them a lot in the longer term.

Meanwhile, figures from the Irish Central Bank show house prices down by more than 10% and growth in mortgage lending at its lowest for 22 years. In September, €736m was lent in mortgages compared with €2bn a month at the height of the boom.