A couple from North Dublin, who are fighting a mortgage interest rate increase which they say is in breach of contract, have won their High Court appeal against the Financial Services Ombudsman.
Kenneth and Donna Millar of Portmarnock, County Dublin, brought their High Court appeal against the Financial Services Ombudsman after a complaint made against their mortgage lender – Danske Bank – was rejected by the Ombudsman.
The Millars had complained to the Financial Services Ombudsman that their lender had increased the interest rate on their six variable rate investment mortgages and on the personal mortgage for their family home to 4 percent in November 2011 – at a time when the Central European Bank´s interest rates were at an all-time low.
They argued that under the terms of their mortgage agreements the bank was only entitled to amend the interest rates on their mortgages “in line with general market interest rates”. However, when the Millars started fighting the mortgage interest rate increase with Danske Bank, they were told that the rates set by the European Central Bank were irrelevant.
The Millars also provided the Ombudsman with an explanation of variable rate mortgages that had been published on the National Irish Bank website at the time the first of the mortgages was taken out in March 2009 (before the National Irish Bank was taken over by Danske Bank). The explanation said that the interest rate borrowers paid on National Irish Bank variable rate home loans change in line with any fluctuations in general interest rates. The explanatory note went on to say “When interest rates go down your monthly payments do likewise. However, when interest rates rise, your monthly payments will increase too”.
After considering the Millar´s complaint, the Ombudsman rejected it on the grounds that the relevant clause in their mortgage agreements stated that the bank would alter the rate “in response to market conditions” and not “in line with general market interest rates”. The Ombudsman said that this distinction was significant and released Danske Bank from maintaining interest rates in line with those issued by the European Central Bank. The Ombudsman also agreed with the bank that it was not obliged to release details of how risk assessments on Kenneth and Donna Millar were conducted.
At the High Court, Mr Justice Gerard Hogan disagreed with the decision of the Financial Services Ombudsman. He said that the text of the clause was ambiguous in the “general factual background against which the contract was entered into” and that the Millars were justified in fighting the mortgage interest rate increase (the full text of Judge Hogan´s verdict can be read here). The Judge dismissed the Ombudsman´s original decision and instructed the Ombudsman to review the Millar´s complaint against Danske Bank “in a manner not inconsistent with this judgement”.
What Judge Hogan´s Verdict Means to Other Variable Rate Mortgages
Approximately 207,000 mortgages in Ireland are variable rate mortgages like the Millar´s – almost 30 percent of the Irish mortgage market – and although Judge Hogan´s verdict may provide inspiration for fighting a mortgage rate increase if you believe you have been treated unfairly by your bank, the issue in Millar -v- Financial Services Ombudsman was based on contract law – rather than whether or not the Millar´s lenders had acted unfairly.
Significantly Mr Justice Gerard Hogan did not rule that Danske Bank were in breach of contract or instruct Danske Bank to reveal how the Millars were risk-assessed. The Millars have always been up-to-date with the mortgage repayments on their seven properties, and what Judge Hogan´s verdict means to other variable rate mortgage holders is that you will have to find fault with your morgtage agreement if you intend fighting a mortgage interest rate increase.
If you are one of the 30 percent of the Irish mortgage market that has a variable rate mortgage, and you would like to know more about fighting a mortgage interest rate increase, you are invited to call our 24 hour helpline to speak with a solicitor in confidence. We cannot guarantee that you will have a successful conclusion to your enquiry, but we will be able to advise you of your options and whether you have a fight on your hands which is worth your while to pursue.