# AIBThe "prevailing rate" was the rate prevailing when we drew down the mortgage

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#### thedman

##### New Member
Just be careful over-estimating the money back.

1 - they will need to work out the correct or most apt margin. This will probably be the highest of the margins they had generally available. - Possibly as high as 2% and unlikely to be under 1.5%
I would argue it is not that simple. The prevailing rate will be different for different people. For me, I was on ECB + 0.75%. My "prevailing rate" should always be ECB + 0.75%.

As per the definition of a tracker rate, and to quote AIB's own terminology:

"the Margin/Adjustment above the ECB rate, this will stay static throughout the life of the loan."

Therefore, it is the margin on the day the mortgage loan started. After that, the prevailing rate is the margin + whatever the ECB rate is (the variable component of the prevailing rate).

I certainly won't be settling for anything less.

#### Sarenco

##### Frequent Poster
Therefore, it is the margin on the day the mortgage loan started.
I don't think so.

If AIB had continued to offer a tracker product, albeit at an unattractive margin (say, ECB+4%), then that would have been the "prevailing rate" when your fixed-rate term came to an end. AIB's mistake was to withdraw their tracker product entirely.

In those circumstances, I think the "prevailing rate" has to be either (a) the margin most commonly offered by AIB on trackers immediately prior to their withdrawal of the product; or (b) the average margin applied on all outstanding trackers written by AIB.

I suspect either formulation comes out at around ECB+1%.

#### thedman

##### New Member
I don't think so.

If AIB had continued to offer a tracker product, albeit at an unattractive margin (say, ECB+4%), then that would have been the "prevailing rate" when your fixed-rate term came to an end. AIB's mistake was to withdraw their tracker product entirely.

In those circumstances, I think the "prevailing rate" has to be either (a) the margin most commonly offered by AIB on trackers immediately prior to their withdrawal of the product; or (b) the average margin applied on all outstanding trackers written by AIB.

I suspect either formulation comes out at around ECB+1%.
As per AIB's definition of a tracker rate (that they still publish to this day):

AIB said:
the Tracker Interest Rate will be made up of two parts:
(a) the European Central Bank’s main refinancing operations minimum bid rate (the “ECB rate”) which is variable; and
(b) the Margin/Adjustment above the ECB rate, this will stay static throughout the life of the loan.
So, while the prevailing tracker rate may, and will, vary over the life of the loan, the only variance is the ECB portion.

Whatever margin applied on day 1 of the loan is the margin for the life of the loan. It is in black and white, and leaves zero room for misinterpretation (unless you start talking about certain restructures where the original loan is closed off and replaced by a whole other, different loan etc).

#### Sarenco

##### Frequent Poster
Yes but the life of the tracker rate loan came to an end when you decided to switch to a fixed-rate product.

It's the "prevailing" tracker rate (however determined) at the end of your fixed-rate period that matters. Otherwise, the contract would have said that you simply revert to the tracker rate that applied to you immediately prior to switching to a fixed-rate product.

In any event, it shouldn't really make a very material difference to you.

#### thedman

##### New Member
Yes but the life of the tracker rate loan came to an end when you decided to switch to a fixed-rate product.
It most certainly did not! The interest option was changed, but the loan was still the loan. It wasn't a case that I (or anyone, for that matter) repaid the original loan and then took out another, separate loan.

The life of the loan is from the day the loan is agreed until the day the loan is fully paid/written off.

1. If you change the repayment date, you don't kill off the old loan and take out a new loan.
2. If you change the interest rate option, you don't kill off the old loan and take out a new loan.
3. If you make an additional payment, you don't kill off the old loan and take out a new loan.
4. If you take a repayment holiday, you don't kill off the old loan and take out a new loan.
5. etc.

If, as you suggest, it is a whole new loan, then where are the contracts for that new loan? If you change from fixed to variable or vice-versa, do you go through the whole application process again? Are the solicitors involved? Are new contracts agreed and signed by all parties? Is the account closed and a new one opened? Of course not. You are simply changing the interest rate option as catered for in the loan agreement you signed on day one.

Restructures can be different as, in some cases, that can involve closing the old loan and creating a hole new one to replace it. It really depends on the manner of the restructure.

It's the "prevailing" tracker rate (however determined) at the end of your fixed-rate period that matters. Otherwise, the contract would have said that you simply revert to the tracker rate that applied to you immediately prior to switching to a fixed-rate product.
But the original loan agreement could not predict what the "prevailing tracker rate" would amount to. The tracker rates are variable. They consist of the ECB rate (variable) and a fixed margin, again that is static for the life of the loan.

In any event, it shouldn't really make a very material difference to you.
It makes a huge difference.

Firstly, it has been 10 years on a loan of several hundred thousand euro. Even 0.25% over 10 years is a huge difference (without even taking compounding factors into account), that is €2,500 per €100,000 borrowed for every quarter of a percent difference. That adds up to tens of thousands for a loan of several hundred thousand when you compare a margin of 0.75% to a margin of 1.75%.

Secondly, it is the whole basis of the argument for "prevailing rates". AIB used vague terminology which they claim had no specific meaning and thus they could make up whatever margin they wanted. If, at the time of entering the loan agreement, they intended to change the margin because you fixed for a period of time, they would/should have stated this in the interest rate options, but they didn't. That would have been fine if they did - everybody would know where they stood and could make an informed decision about switching to a fixed-rate. But because they didn't, we are left with the default, simple, plain rule that the margin is fixed for the life of the loan.

Which basically leaves victims in 2 cohorts:
• The first, where they have a specific margin in their loan agreement - that is simple. It is absolutely clear what margin the customer should have been offered.
• The second, where no margin was quoted in the agreement is a little harder. On one hand, it could be argued that it is whatever margin was being offered by the bank at the time the loan was agreed. On another hand, it could be argued that it was the last margin offered by the bank before withdrawal. On another hand again, it could be argued that the margin is only agreed when a tracker rate is first entered (and thus the margin gets quoted and accepted). Unfortunately, it is ambiguous (AIB's fault for not stating clearly in the contract; the customer doesn't get to write the contract, AIB does. AIB is the expert on the matter, the customer is just a consumer). In this case, because AIB reneged on the offer of a tracker (because they had withdrawn them), the debate is over what margin would/should have been offered if AIB hadn't failed to life up to their obligations. Given that it was AIB's accidental error that the contract never clearly stated what would happen and AIB's intentional act for not offering the tracker rate when they should have and their intentional act for spending 10 years deliberately refusing to stop the fraud and resolve the situation, I would argue that the margin decided today should err very much on the side of the victim. Hell, an argument could be made that the loan should simply be written off as AIB have continuously breached their side of the contract and acted belligerently at every level and with every attempt to resolve the issue. But a decision such as that could only happen in the high court and would require a sensible and courageous judge (and would likely involve numerous appeals back and forth etc dragging on for years).

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#### Brendan Burgess

##### Founder
I certainly won't be settling for anything less.
Hi dman

Have you submitted a complaint to the Ombudsman with this argument or have you initiated legal proceedings?

It would be interesting to see how you get on.

Brendan

#### thedman

##### New Member
Hi Brendan,

at the moment, I am still waiting for final verdict from the appeals panel, After that, the plan was to go to the ombudsman (as I have zero confidence in the Appeals process). Depending on that outcome, I would have considered going to high court if still not happy. However, with this recent announcement (well done, by the way!), all that may not be necessary, as AIB may fast-track now and back down.

To be honest, I would have been happy to settle for a middle ground several years back, but having spent so much time on this and been so enraged by the Appeals Panel process and game-playing by AIB that, at this stage, settling for anything less just feels like a surrender.

My case is being handled (along with a whole bunch of others) by Padriac Kissane. I'm not sure if you are liaising with him (I know both of you have been fighting the same fight for so long on behalf of others)?

#### Brendan Burgess

##### Founder
My case is being handled (along with a whole bunch of others) by Padriac Kissane.

3.2 FURTHER FIXED INTEREST RATE OPTIONS/CHOICE

At the end of any fixed interest rate period, the Customer may choose between: (a) a further fixed interest rate period, or

(b) conversion to a variable interest rate Mortgage Loan, or

(c) conversion to a tracker interest rate Mortgage Loan,

at the Bank's then prevailing rates appropriate to the Mortgage Loan.

I would be surprised if he is arguing that the word "then" means the start of the mortgage and not the "end of any fixed rate period" .

Even if he is arguing that, I would be astonished if he advised anyone whose case was turned down by the Ombudsman to go to the High Court.

Brendan

#### thedman

##### New Member

3.2 FURTHER FIXED INTEREST RATE OPTIONS/CHOICE

At the end of any fixed interest rate period, the Customer may choose between: (a) a further fixed interest rate period, or

(b) conversion to a variable interest rate Mortgage Loan, or

(c) conversion to a tracker interest rate Mortgage Loan,

at the Bank's then prevailing rates appropriate to the Mortgage Loan.

I would be surprised if he is arguing that the word "then" means the start of the mortgage and not the "end of any fixed rate period" .
I have no problem with the word "then". That is correct, it is the "then" prevailing rate that is appropriate to the Mortgage Loan that should have been offered.

The argument is, in the absence of any other definition for the "then prevailing rate appropriate to the loan", that the prevailing rate is whatever the then ECB rate is + a fixed margin. And that the margin, to quote AIB's definition again:

the Tracker Interest Rate will be made up of two parts:
(a) the European Central Bank’s main refinancing operations minimum bid rate (the “ECB rate”) which is variable; and
(b) the Margin/Adjustment above the ECB rate, this will stay static throughout the life of the loan.

The only margin quoted is the 0.75 margin on the loan agreement which was the margin applied on day 1 of the loan and was to stay static for the life of the loan. There is no other margin mentioned or any mention of the ability of the bank to alter said margin. In fact, in my case, because I only fixed a portion of my mortgage, one portion has remained on a tracker with a 0.75% margin since the beginning. Therefore my argument is that the only margin "appropriate to the Mortgage Loan" is 0.75%.

Even if he is arguing that, I would be astonished if he advised anyone whose case was turned down by the Ombudsman to go to the High Court.
To be honest, we haven't gotten that far! At the rate things were going, that could have been years away!. But, as per this news now, I would hope that AIB will not continue to drag this out and look to resolve in the near term (but who knows?).

#### Sarenco

##### Frequent Poster
The interest option was changed, but the loan was still the loan
Ok but the terms upon which you took out the loan were amended when you opted to fix so the terms of the loan that you originally drew down are irrelevant in relation to that element of the loan that you decided to fix. From that point, you were entitled to roll to "the then prevailing tracker rate". There was no express or implied entitlement to revert to your original tracker rate.
The argument is, in the absence of any other definition for the "then prevailing rate appropriate to the loan", that the prevailing rate is whatever the then ECB rate is + a fixed margin.
Fair enough but I don't think there is any reality to that argument.
€2,500 per €100,000 borrowed for every quarter of a percent difference
Eh, 0.25% of €100,000 is only €250.

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#### Skippy1

##### Frequent Poster
There is no other margin mentioned or any mention of the ability of the bank to alter said margin
Agreed. 3.6.3 (b) goes on to state that can't switch between tracker interest rates directly or indirectly to avail of a lower prevailing Tracker Margin.

So customers can't avail of lower Margins that may prevail in the future. How does that work exactly? My view is your locked in at drawdown and contract start. Can't go down.....shouldn't go up either unless a new customer with different loan offer

#### Sarenco

##### Frequent Poster
Agreed. 3.6.3 (b) goes on to state that can't switch between tracker interest rates directly or indirectly to avail of a lower prevailing Tracker Margin.
Similarly, that provision of the original contract became irrelevant as soon as you amended the original contract in order to fix. From that point, a new contract came into being (i.e. the contract setting out the terms of your fixed-rate mortgage).

So, if the "prevailing" tracker rate (i.e. the margin over the ECB refi rate) happened to be lower when the fixed term came to an end than the tracker rate at the time of the original drawdown, then you could have benefitted from that reduction.

#### RedOnion

##### Frequent Poster
So, if the "prevailing" tracker rate (i.e. the margin over the ECB refi rate) happened to be lower when the fixed term came to an end than the tracker rate at the time of the original drawdown, then you could have benefitted from that reduction.
Indeed, thousands of people benefitted in this way.

#### Megafan

##### Registered User
Eh, 0.25% of €100,000 is only €250.
Over 10 years it would be €2,500...

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#### Sarenco

##### Frequent Poster
Over 10 years it would €2,500...
Well, it would be somewhat less than that as the principal outstanding reduced over the 10 years.

#### Megafan

##### Registered User
Well, it would be somewhat less than that as the principal outstanding reduced over the 10 years.
Not on new mortgages it wouldn't. No point in arguing over it. No one will really know anything until everyone knows everything.

#### thedman

##### New Member
Ok but the terms upon which you took out the loan were amended when you opted to fix so the terms of the loan that you originally drew down are irrelevant in relation to that element of the loan that you decided to fix. From that point, you were entitled to roll to "the then prevailing tracker rate". There was no express or implied entitlement to revert to your original tracker rate.
Ok, I don't want us to go around in circles, so I will try to explain it another way and we can focus on the/any specific issue(s) that we disagree on.

Am I right in saying that you now accept that is is not a new loan, but an amendment to the same loan? (I ask because this is a crucial point)

If so, then the question is "what terms are being amended". I hope we can both agree that the only amendments are:
• the consumer will be on a fixed interest rate for a period of time; and
• after, they will be given the option of another fixed, SVR or tracker at the "then prevailing rate appropriate to the loan".
and it is the lack of clarity in that last point is at the heart of what is currently being debated (and what has been the issue since 2018)?

Are we also in agreement that a tracker interest rate consists of a variable component (the ECB rate) and a margin which will (and using AIB's own wording) "stay static throughout the life of the loan"?

Because, if you do agree with all the above, my argument is, without any further wording that the margin would not stay static, the only wording/definition we have to fall back to determine what the margin should be is AIB's own definition that the margin would remain static for the life of the loan. That the "prevailing" rate is the sum of "whatever the ECB rate is at the time" plus that static margin.

To look at it another way (and I accept that this only applies to a portion of us), in determining what margin is appropriate for the loan, is it not the margin that the tracker portion of my loan is on? The "prevailing rate" on that portion changes regularly (every time the ECB changes its rates), but the margin stays static for the life of the loan.

Eh, 0.25% of €100,000 is only €250.
I was referring to "over 10 years", as per Megafan's reply,

#### Metatron

##### Registered User
Hi thedman,

You certainly have a valid argument that stands some scrutiny, in part, due to the particular clause utlised by AIB within its own drafted contract. Best of luck!

#### Sarenco

##### Frequent Poster
Am I right in saying that you now accept that is is not a new loan, but an amendment to the same loan?
No, it’s a loan on completely different terms. The original contract is no more - it was replaced in its entirety as soon as you fixed.
If so, then the question is "what terms are being amended". I hope we can both agree that the only amendments are
Again, the original contract was replaced in its entirety when you fixed - you are relying on the term of a contract that no longer exists.

#### Sarenco

##### Frequent Poster
Not on new mortgages it wouldn't. No point in arguing over it. No one will really know anything until everyone knows everything.
I don’t follow. The principal balance, upon which interest is charged, amortises as the loan is repaid. That is the case with all mortgages - other than interest-only mortgages - new and old.

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