A North Dublin couple, who are contesting a mortgage interest rate increase, have been told by a High Court judge that he is instructing the Financial Services Ombudsman to look again at a decision made in their complaint against the Danske Bank.
Kenneth and Donna Millar of Portmarnock, County Dublin, initiated legal action against the Financial Services Ombudsman after a failed complaint against their mortgage lender – Danske Bank. The Millars had complained to the Ombudsman that Danske Bank had increased the interest rates on their six variable rate buy-to-let mortgages and on the mortgage on their family home to 4 percent – at a time when the interest rates set by the Central European Bank were at an all-time low.
They argued that the bank was only entitled to change the rate of their variable interest mortgages “in line with general market interest rates” as was stated in their mortgage contract. However, when they started contesting the mortgage interest rate increase with Danske Bank in November 2011, the Millars were told that the bank did not receive any funding from the European Central Bank and so their interest rates were irrelevant.
The Millars also referred the Ombudsman to an explanatory note on the National Irish Bank website (now taken over by Danske Bank) from March 2009 which stated “the interest rate you pay on a National Irish Bank variable rate home loan changes in line with any fluctuations in general interest rates. When interest rates go down your monthly payments do likewise. However, when interest rates rise, your monthly payments will increase too”.
The Ombudsman rejected the Millar´s complaint on the basis that clause 3 of their mortgage contracts stated that the bank would alter the rate “in response to market conditions” and not “in line with general market interest rates”. The Ombudsman also agreed with the bank that it was not obliged to disclose the basis on which their mortgage interest rates were calculated or how they were risk-assessed.
However, at the High Court, Mr Justice Gerard Hogan found that the clause was ambiguous in the “general factual background against which the contract was entered into” (the full text of the verdict can be read here). The Judge set aside the Ombudsman´s decision and instructed the Ombudsman to look again at the Millar´s complaint against the Danske Bank “in a manner not inconsistent with this judgement”.
The Implications of Millar -v- Financial Services Ombudsman
Variable interest rate mortgages like the Millar´s account for approximately 207,000 mortgages in Ireland – almost 30 percent of the mortgage market – but whether or not Judge Hogan´s verdict in Millar -v- Financial Services Ombudsman will enable other property owners to start contesting a mortgage interest rate increase is not clear.
The Millar´s appeal was upheld because of the ambiguous way in which their mortgage agreements were constructed, and not because the judge found that the bank had done anything wrong. Mr Justice Gerard Hogan neither ruled that Danske Bank were in breach of contract nor instructed Danske Bank to reveal how the Millars were assessed for their level of risk – significant inasmuch as the Millars have never been in arrears with their mortgage repayments. Consequently we believe that the implications of Millar -v- Financial Services Ombudsman are that contesting a mortgage interest rate increase will involve an understanding of complex contract law.
If you are one of the 207,000 variable rate mortgage holders in Ireland and you would like to know more about how to contest a mortgage interest rate increase, you are invited to call our 24-Hour helpline or request free expert advice about contesting a mortgage interest rate increase by completing your details in the form at the side of the page.