AIB AIB options letter before October 2008

Brendan Burgess

Founder
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37,956
If your fixed rate expired after October 2008 and you got the €1,615 , this thread is of no relevance to you.

I have been looking at the letter sent to borrowers whose fixed rate ended before October 2008. Many people who got this did nothing.



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In my view, this letter is not clear at all. It is designed to confuse people which would only encourage them to do nothing.

For example, it's clear what you do if you want a fixed rate. Just tear off the form and send it back.

But what do you do if you want a tracker? It's not clear to me at all.

Brendan
 
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verywhys

Frequent Poster
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107
More evidence of the sloppy paperwork and practices that were prevalent at the time and AIB are seeking to benefit from now.
Was this the standard options letter being sent out by AIB or were there other letters that were worded differently?
 

carlito

Registered User
Messages
7
Interesting. It basically says on expiry that the rate will auto revert to variable. That after this you may choose a fixed rate and that to avail of a fixed rate on expiry return the form. A list of "sample" rates is provided but it doesn't make it clear that the tracker option is available to all customers receiving the letter. AIB are using this in the appeal reply to say they provided the option but if a tracker was not specified on the original contract, I fail to see how a customer would know that the tracker rates were applicable to them under clause 3.2 or how they were given an option to choose any rate except variable or fixed.
 

Brendan Burgess

Founder
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37,956
Folks
In case it's not clear

This is completely separate from the Prevailing Rate issue.

This only applies to people whose fixed rate expired before October 2008.

I have deleted the off topic posts.

Brendan
 

ciarogs

Registered User
Messages
4
This is my situation. Started with Tracker in 2006. Fixed in 2007 for one year. Received this letter and did nothing through ignorance. In 2009 we requested our Tracker back as rates were diverging. Told not available anymore. Fighting for it back since 2016 with Padraig Kissane but no joy!
 

Brendan Burgess

Founder
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37,956
Hi ciarogs

Very interesting.

Do you have a copy of the letter which was sent to you in 2008 when your fixed rate ended?

And what is the basis for your fight to get it back?

Brendan
 

ciarogs

Registered User
Messages
4
I’ll post it next week- away from home at the moment. Padraig feels that the Tracker was the initial rate attached to the account and should have been available to us when we asked in 2009. In fact should have been the default rate on leaving the Fixed in 2007.
 

carlito

Registered User
Messages
7
I received an identically worded letter in 2007. I took out the mortgage in 2006, the contract was for a variable but I opted to start on a 1 year fixed rate. I switched from this to a fixed rate which expired post 2008 and so was included in the prevailing rate review due to clause 3.2 in the mortgage contract.

I appealed on the prevailing rate issue but in the appeal I though it was worth bringing up the 2007 letter as it did not explicitly provide the option to convert to a Tracker - just revert to Variable with the option to convert to a fixed rate at a later date or to return the form "immediately" to "avail of a fixed rate". As per the letter attached in the first post, tracker rates were included on the list but there was no obvious option to avail of them or that they applied to all customers with clause 3.2 and not just those who had a Tracker specifically mentioned on their original contract.

AIB responded to this in the appeal:

"The Bank wrote to the cusomers on XX/XX/2007, in advance of the end of their Fixed rate on XX/XX/2007, to remind them of the forthcoming end of the Fixed rate and to ask them to select a rate to apply when the Fixed rate period ended. In this letter of XX/XX/2007, the Customers were given the opportunity to select a Tracker rate on XX/XX/2007 but they did not do so. There was therefore no service failure on the part of the bank"

Note the wording regarding "opportunity" to switch rather than "option". I think the bank are being very careful with their words here.

One other item of interest in the letter received AIB in 2007 when we went to a new fixed rate: the letter states “You will be entitled, with the banks prior consent, to withdraw from the fixed interest rate agreement either by repayment in full of the Mortgage Loan and interest accrued to the date of repayment or by conversion to the variable interest rate then prevailing”. Again - no mention of tracker.
 
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Brendan Burgess

Founder
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37,956
Hi Carlito

Their response is interesting.

I think that this will be one for the Ombudsman after the Appeals Panel rejects your appeal.

That options letter is very confusing - either by carelessness or design. But it doesn't really matter which - it's still confusing.

The letter should have said : "To avail of a fixed rate or a tracker rate, please complete the tear-off section..."

The tear-off section covered both

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You could have put in here "Tracker home LTV >80%"

But I understand this language. Most people probably don't.

When I go to renew my health insurance I find the options very confusing. I do a bit of research and then say "OK, I can't decide, I will come back to that later" Then life intervenes and before I know it, my policy has auto-renewed.

I think it's the same here. Many people would be confused by that letter. They would put it to one side with a view to investigating it later or maybe with a view to calling AIB to discuss it. Then life intervenes and they never get back to it. And they have lost their tracker.

It would be worth doing a mock-up of what you think the form should have looked like. I would put the options on the tear-off with a box beside each one to be ticked to select your choice.

Alternatively, it would be worth getting hold of the options letters sent by the other lenders to see if they made it clearer.

That might convince the Ombudsman.

Brendan
 
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verywhys

Frequent Poster
Messages
107
This letter could mean one of two things......the recipients of this letter were only offered a fixed rate or AIB believed the tracker rates to be a form of fixed rate, because of the fixed margin......if the latter is the case, then AIB's attempt to retrospectively increase the tracker margin and the prevailing rate might become even more questionable.
 

carlito

Registered User
Messages
7
Response from AIB...the only relevant bit was:

"This letter, dated --/--/----, contained a number of different interest rate options. In addition to the Fixed and Variable rates quoted, four Tracker Home LTV rates were listed with an explanation in the final paragraph that an up-to-date property valuation report would be required (to determine the appropriate LTV band) if the Customers wished to avail of one of these rates."

This is false. In the "final paragraph", which is really boilerplate, there is no reference to any of the Tracker rates listed. There is mention of a "Tracker<=60% LTV" for which a valuation report is required in order to avail of it.....but that rate isn't even included in the list!
 

Brendan Burgess

Founder
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37,956
Hi Carlito

So that is their response to the Appeals Panel.

You need now to point out how inaccurate their response is.

And then see how the Appeals Panel views it.

Brendan
 

Brendan Burgess

Founder
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37,956
Also why would you need a valuation to be offered a tracker rate if your mortgage already belonged to one of these LTV bands?
Because the LTV had changed since the mortgage was drawn down?

Because the fixed rate was not based on the original LTV?
 

verywhys

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107
Because the LTV had changed since the mortgage was drawn down?

Because the fixed rate was not based on the original LTV?
I see what you are saying Brendan but ....what if the LTV had not changed from the original LTV?

Where is the offer of a tracker rate in this scenario?

I might be wrong but how often will the LTV change between these different LTV bands?
 
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verywhys

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107
I always thought you would only get a valuation if you thought you might get a lower rate from availing of a different LTV band.....I didn’t know it could be used as a requirement to avail of a rate that in most cases would be in the same LTV band.

That would surely put most customers off availing of the tracker rate.
 

Brendan Burgess

Founder
Messages
37,956
verywhys

You raise a very interesting point. Let's work it through.

You took out a mortgage in 2004 and fixed for three years. You borrowed €90k on a house worth €100k, so 90% LTV.

Your fixed rate ended in 2007. The variable rates and the fixed rates were not adjusted for LTV.
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So you could choose another fixed rate by just filling in the form and sending it back. You could "choose" the variable rate by doing nothing.

Now, let's say you wanted a tracker rate. They depended on the LTV
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In 2007 your mortgage was probably €85k and your property was probably worth €150k. You were very close to the 50% LTV. So you would have needed a valuation to avail of it.

But you would not have needed a valuation to avail of the >80% rate. You would have just written in "Tracker >80%" on this form
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If I had been designing the form I would have said

"Please tick one of the boxes below to indicate which rate you wish to choose. If you choose the LTV of <80% or <50%, you will need to provide an up to date valuation. If you don't tick a box or if you don't return the form you will default to our Standard Variable Rate".

Another problem for AIB
Was the LTV the LTV on expiry of the fixed rate or the original LTV? Most people took out >80% LTV mortgages originally but by 2007, they were below 80% and in some cases below 50%. It was only in 2018 that AIB allowed borrowers who had reduced their LTV to avail of the lower rates.

Brendan
 

verywhys

Frequent Poster
Messages
107
okay cool Brendan, i understand now where you are coming from.....i could see how this might be the case if the customer was to buy a house in 2004 with a 3 year fixed rate....as house prices increased considerably in that time.

i was looking at it from the perspective of a customer that bought a house in 2006 where the average house price in Dublin was €384,000

If a customer got a 90% LTV on a house that cost €384,000, that would be a mortgage of 345,600.
If they got a 1 year fixed rate in 2006 and received this options letter in 2007.....there wouldn't have been much chance of the LTV band changing in one year.

Then this options letter is really not offering a tracker rate to this category of customer. They certainly wouldn't be anywhere near a LTV of <= 60% after one year.
 

Brendan Burgess

Founder
Messages
37,956
hen this options letter is really not offering a tracker rate to this category of customer.
Eh, it is.
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Just reading that form again, the valuation report is only required for the valuations < 60%.

So someone choosing a tracker of >50% did not require a valuation.

Brendan
 
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