THE CENTRAL BANK has warned mortgage lenders not to attempt to bully homeowners into giving up their tracker mortgages.
It has issued orders to banks and building societies to make the details of agreements clear and understandable to customers.
New regulations have been agreed upon by the Central Bank and the Financial Regulator to protect financial customers from exploitation. Under the new rules, lenders must engage is open dialogue with customers and alert them to the potential risks of switching from a tracker mortgage.
The Central Bank and the Financial Regulator surveyed the behaviour of banks during 2008 and 2009, and found that they had failed to communicate appropriately with their customers. They concluded that customers did not understand what they were doing when they agreed to give up their tracker mortgages.
Tracker mortgages are the safest and cheapest type of loans for homeowners.
Unlike variable rate mortgages, the interest on which can be raised at a lender’s discretion, tracker loans are fixed to the rates of the European Central Bank – which have been at the record low of 1% for almost a year and a half.
The regulator released a statement, saying: “Customers must be notified that switching from a tracker rate may mean they will lose the ability to avail of a tracker rate mortgage in the future, where this is the case.”
The Central Bank and the Financial Regulator warned financial institutions not to attempt to coerce customers to switch from safe tracker mortgages to unpredictable and expensive variable rate mortgages.
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