A High Court judge has told the Financial Services Ombudsman to review a decision it made against a couple disputing a mortgage interest rate increase.
Mr Justice Gerard Hogan handed down his instruction to the Ombudsman in a recent case – Millar -v- Financial Services Ombudsman – which had been brought by Kenneth and Donna Millar of Portmarnock, County Dublin, after a complaint made by the Millars against Danske Bank had been rejected by the Ombudsman.
In their complaint, the Millars had claimed that their lender was in breach of contract by raising the mortgage interest rate on their six investment mortgages and a mortgage on their family home at a time (November 2011) when the Central European Bank was reducing interest rates to an all-time low.
The Millars said that – under the terms of their mortgage agreements – Danske Bank was only supposed to raise or lower the interest rate on their mortgages “in line with general market interest rates”. However, when the Millars started disputing the mortgage interest rate increase, they were told by Danske Bank that the European Central Bank´s interest rates were irrelevant.
The Millars also claimed that at the time they had taken out their variable interest rate mortgage, the information provided to them stated “When interest rates go down your monthly payments do likewise. However, when interest rates rise, your monthly payments will increase too”. Although their mortgages had been taken out with the National Irish Bank, they expected the Danske Bank to honour their contract after the National Irish Bank was rebranded.
The Ombudsman reviewed and rejected the Millar´s complaint it on the basis that the contentious clause in their mortgage agreements stated that the bank would amend the mortgage interest rate “in response to market conditions” and not “in line with general market interest rates”. The Ombudsman also supported the bank in its assertion that it was not obliged to release details of how risk assessments were conducted on Kenneth and Donna Millar.
The Millars continued disputing the mortgage interest rate increase, and their case went to the High Court where it was heard by Mr Justice Gerard Hogan. Judge Hogan disagreed with the Financial Services Ombudsman´s rejection of the Millar´s complaint because the text of the clause in question was ambiguous in the “general factual background against which the contract was entered into”.
The Judge dismissed the Ombudsman´s rejection of the Millar´s complaint and told the Ombudsman to conduct another review of the complaint against Danske Bank “in a manner not inconsistent with this judgement”.
What are the Consequences of Judge Hogan´s Verdict?
The consequences of Judge Hogan´s verdict could have a significant impact on Ireland´s estimated 207,000 property owners that have variable interest rate mortgages like the Millar´s – albeit subject to a contentious clause existing in their mortgage agreements.
Although Mr Justice Gerard Hogan did not agree that Danske Bank were in breach of contract or instruct the lender to reveal how the Millars were assessed, the potential exists for thousands of homeowners to start disputing a mortgage interest rate increase knowing that there is an alternative course of action if the Ombudsman rejects their complaint.
If you are one of the 30 percent of the Irish mortgagors that have a variable interest rate mortgage, and you would like to find out more about disputing a mortgage interest rate increase, you are invited to call our 24 hour helpline to speak with a solicitor experienced in the financial services sector. Calls to our helpline are totally free, totally confidential and totally without obligation on you to act on any of the advice we provide.