The Governor of the Central Bank was asked about this at recent meeting with the
Oireachtas Finance Committee
Senator Rose Conway-Walsh:
I am referring to those people who went into a bank to get a mortgage at the time that tracker mortgages were available but were not told about the tracker mortgage rate or were not offered such a mortgage. Is there any case for those people who were not on a fixed rate but were requesting a new mortgage?
Professor Philip Lane: Over the whole tracker mortgage period, from the early 2000s onwards, clearly there were waves where individual banks might have been pushing certain products. Competition was pretty intense in the mortgage market in the mid-2000s. There is a lot of volatility in this area. A bank might offer a product for a while and might then become overexposed in respect of a certain type of loan and pull back, at which point other lenders come in. Those are the market dynamics of the credit market. One cannot say, therefore, that all lenders can have a fixed set of products that they offer at all times.
Senator Rose Conway-Walsh:
When the Central Bank was examining the tracker mortgage situation, did it examine the cases of the new people who took out mortgages at the time in question to determine whether enough information was made available to them and whether there was enough transparency? On the basis of the Central Bank's consumer protection role, do our guests believe that those customers were given the best product? Was this considered?
Mr. Ed Sibley: There will be different circumstances for different borrowers. One can see that in the market today. Some borrowers will value a fixed-rate product for three to five years.
Senator Rose Conway-Walsh:
I understand that.
Mr. Ed Sibley: That is perhaps based on their own judgment on the certainty of cost and their view on where interest rates might go. This trend would have been prevalent in the system before the crisis. What we are seeing - Ms Rowland can add to this - is that there was a lack of transparency. There was ambiguity in the contracts that were being used at the time. That has led to many of these issues. We have pushed, through consumer protection work since 2008, to ensure better transparency and less contract ambiguity in order that what is being taken on by the consumer is clearer.
Senator Rose Conway-Walsh:
Can the delegates say conclusively that anyone who took out a new mortgage when tracker mortgages were available is not entitled to be included in the compensation arrangement?
Professor Philip Lane: Is the Senator referring to people who know now what they would have got with a tracker at the time in question?
Senator Rose Conway-Walsh:
Yes.
Professor Philip Lane: That category would not be included. We are examining the handling of those who had a tracker mortgage or the right to one, not the wider group. It is an interesting question to think about. One must consider how regulators' work evolves. What we are saying now is that while we are all the time trying to reinforce the code in terms of transparency and so on, we now have what is called a consumer risk-assessment model whereby, essentially to cover what the Senator is talking about, our plan is to be much more pre-emptive and in the moment in terms of what is going on. It is a matter of determining whether any new product makes sense and the hidden problems in any new product that might be offered. The goal is to be a lot more pre-emptive and catch problems before they materialise. Perhaps Ms Rowland can reinforce that.
Ms Derville Rowland: If I understand the Senator's question correctly, it is about whether everybody who had a mortgage and for whom a tracker mortgage would have been a better product at the time should be in the scope of the examination.
Senator Rose Conway-Walsh:
Exactly.
Ms Derville Rowland: That is beyond the scope of this examination. The examination is confined to the 2 million accounts. That is where the starting point was. I refer to where the customer might have started on a tracker product or had an interest rate applied to it at any stage, or had an entitlement, or may have had an expectation of an entitlement, through the process they engaged in. It does not go as far as to cover what the Senator referred to. I do not believe it could. I do not know whether Mr. Sibley wants to add to that.
Mr. Ed Sibley: In the market today, a customer can choose to take out a mortgage on a fixed rate for five years or to be on a variable rate. Who knows what the circumstances will be in three to four years? Interest rates might go up, in which case it will benefit the person who has chosen the fixed rate as opposed to the person with the variable rate. Alternatively, interest rates might go down. There is a degree of choice in that regard. As long as it is informed and transparent, it is not an issue.