Thousands of families could end up sharing a bonanza of up to €190m after AIB wrongfully took their valuable trackers off them.
AIB has finally owned up to a massive tracker mortgage problem, after denying it for years.
It will have to restore at least 3,000 homeowners to good- value trackers and compensate them.
The redress is likely to cost the bank an average of €65,000 per customer.
As part of its annual results presentation the bank has admitted that it has now set aside €102m to cover the cost of the tracker redress. And it has set aside another €85m for “other related matters” as part of the tracker review.
Only weeks ago the bank denied it had wrongly refused to restore trackers to families.
The about-turn comes as the bank announced it made profits of €1.9bn last year.
AIB’s move to put aside huge amounts of cash to compensate for the loss of trackers comes months after Permanent TSB conceded that it has to restore almost 1,400 people to trackers and to compensate them.
People who are denied a tracker end up paying a variable rate, which are among the most expensive in the eurozone.
The gap between the cost of a tracker mortgage and a variable rate is so dramatic that families need to earn an extra €12,500 a year to pay the difference, research has found.
Financial expert Padraic Kissane, who specialises in tracker-restoration cases, estimates that AIB has around 3,000 customers wrongly denied a tracker after a period on a fixed rate.
Mr Kissane said that setting aside of millions of euro to cover the cost of wrongfully denying families trackers was in contrast to the bank’s approach up to now.
“I walked out of a meeting with AIB just before Christmas because the bank didn’t feel any customer would have to get their tracker back,” he said.
Last October the Central Bank launched an industry-wide review of the wrongful removal of valuable tracker mortgages. This was seven years after the then Financial Services Ombudsman Joe Meade wrote to the Central Bank calling for a probe across all the banks.
AIB is understood to have 300 staff now poring over all of its mortgage contracts to work out who is due to have a tracker restored and get compensation.
AIB had either refused to comment on the issue, or denied there was a problem.
Yesterday it said: “In our annual financial report, we have provided €105m for any consumer redress which may arise from the review. We have also provided €85m for losses that may be recognised by AIB to cover revised terms on mortgage accounts and other costs associated with the review.”
Those due to have a tracker restored had opted for a fixed rate for a defined period at a time when European interest rates were raised, but when that period expired they were denied their right to return to a tracker.
Tracker mortgages have an interest rate that is a set a margin over the European Central Bank benchmark interest rate.
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