DUBLIN (Reuters) - Ireland’s central bank expects the number of customers overcharged by lenders relating to its investigation into tracker mortgages to rise significantly to close to 15,000, Governor Philip Lane said on Tuesday.
The central bank said on Monday that it had identified 8,200 accounts where the right to, or option of a tracker rate and/or the correct tracker rate was not provided in accordance with lenders’ contractual requirements.
Tracker mortgages, which follow the European Central Bank rate, were sold in Ireland prior to the financial crisis and have proven significantly cheaper than variable or fixed rate mortgages as ECB rates have long been at record lows.
“We do think that number is going to rise, the 8,200 is the lower bound. We would expect to see a significant increase above that number,” Lane told a parliamentary committee.
Asked it could reach 15,000, Lane said that might be a reasonable estimate and the total would not be too far away from such a level. The central bank expects the 15 lenders involved to have identified all customers that have been affected by mid-2017.
At 8,200 cases, the total cost of redress and compensation for lenders would be in the order of 175 to 225 million euros, Investec Ireland analyst Owen Callan estimated, with risk to the upside in the event of significant penalties being levied.
The central bank last month fined permanent tsb (IL0A.I), the first lender to start a compensation programme for customers, 4.5 million euros for errors on its treatment of tracker mortgages.
“Existing legal provisions or compensation already announced by the Irish banks on this issue should be more than enough to cover the cost of this redress programme, and with up to 15 lenders involved in the examination the cost is reasonably well spread,” Callan said, referring to the 8,200 confirmed cases.
Reporting by Padraic Halpin; Editing by Greg Mahlich