Is a Central Bank Review also needed for those who were on LTV >80% rate at inception?

[Coco_Dazzler]

Given the widely publicised scandal involving tracker mortgages as follows:

Tracker rate (at start of mortgage) to Fixed rate to Tracker rate
Originally not allowed according to the banks, however, Central Bank of Ireland has said otherwise and now compensation and refunds are due to customers.

What is the difference with the following (aside from the type of rate) scenario:

LTV >80% (at start of mortgage) to Fixed rate to LTV >80% / standard variable rate - allowed by the bank; whereas

LTV >80% (at start of mortgage) to Fixed rate to LTV Var >50<=80% - not allowed by the bank despite having provided an independent professional valuation report (as requested) to show the outstanding loan versus the value of the property qualifies for the lower LTV Var >50<=80% rate.

In the case of tracker mortgages, banks were found not to have been sufficiently clear with customers or failed to honour contractual commitments.

Surely by forcing customers to accept they can only go back to LTV >80% (based on original market value rather than current market value) is another form of fixing the rate to their advantage with current interest rates.

What is the difference in the terms and conditions when comparing a mortgage granted at LTV >80% vs. a mortgage granted with a tracker rate ?

 

[Sarenco]

Some banks (e.g. KBC, UB) do actually allow borrowers to move to a lower LTV bracket during the life of a mortgage.

In any event, unless the loan terms give a borrower a contractual right to move to a lower LTV bracket why would any right to compensation arise if a bank decides not to allow such a move?

You can always switch to another lender...

 

[Coco_Dazzler]

Thank you for your response and I understand about switching and differnet banks having different product offerings. Conceptually, it seems odd to me why anyone would willingly lock (to avoid using the word fix) their variable rate at LTV>80% in their mortgage contract for the term of their mortgage when naturally the LTV is expected to dimish over time. So I guess legally then, in the case of the tracker mortgages, was it determined by the Central Bank of Ireland that they have a 'contractual right' to go back to a tracker rate after taking out a fixed rate? Was this not apparent...

 

[Sarenco]

In most (but not all) cases it was readily apparent that impacted borrowers had a contractual right or option to revert to a tracker rate at the end of the relevant fixed term.

The banks in question, either deliberately or recklessly, ignored their own contractual obligations in thousands of cases and the Central Bank is currently overseeing a "look back" review exercise to identify all such remaining cases.

 

[Coco_Dazzler]

This seems to be an example of the killer clause in the mortgage contract for LTV>80%: LTV Variable Interest Rate Mortgage Loan: “The customer may at any time convert a LTV variable rate to a fixed interest rate mortgage loan at the Bank’s then prevailing rates appropriate to the mortgage loan. However, the customer may not convert the LTV variable rate directly or indirectly from one LTV variable rate to another LTV variable rate in order to avail of a lower LTV variable rate”. If caught by it (ie. when your LTV moves to >50<=80%), I guess switching as Sarenco says is the best way to go!

 

[Freshstart]

Switching is the "only" way to go! It's not that people willingly "lock" into this bracket it's the nature of the product they signed up for. Also dropping a LTV bracket very much depends on the housing market which is not controlled by the banks!