Monday 11 December 2017

Mortgage rates ruling a blow to homeowners

Variable rates here are almost double those in the rest of the eurozone. (Image posed by models)
Variable rates here are almost double those in the rest of the eurozone. (Image posed by models)

HOMEOWNERS have suffered a major setback in the campaign to get mortgage rates reduced.

The Court of Appeal yesterday ruled that a bank was entitled to push up its variable rate at a time when eurozone interest rates were falling.

The case arose after couple Kenneth and Donna Millar, from Portmarnock, Co Dublin, complained to the Financial Services Ombudsman that their mortgage contracts were breached by Danske Bank when it increased the interest rates they were charged – at a time when European Central Bank (ECB) rates were falling.

The Court of Appeal reversed a decision of the High Court that had told the ombudsman to reconsider a ruling as to how variable interest rates were set.

The Millars have a home mortgage and six other buy-to-let investor mortgages on variable rates with Danske Bank, with a total value of around €1.5m.

They complained about Danske’s decision to increase the variable rate of 3.4pc to 4.35pc in November 2011.

They claimed the increase was not in line with their loan agreement.

They said the agreement meant the increase would only be in line with “general” market interest rates.

When former ombudsman Bill Prasifka rejected their claim, they appealed to the High Court, where Mr Justice Gerard Hogan backed the couple.

The Millars successfully argued that their contracts meant the bank could only increase their variable rates in line with general market interest rates.

This High Court ruling was appealed to the three-member Court of Appeal by both Danske and the ombudsman.

Yesterday, the Court of Appeal overturned the finding.

Campaigners for lower variable rates had hoped victory for the couple would have opened up the possibility of banks being forced to radically reduce variable rates to reflect lower money market interest rates.

Variable rates here are almost double those in the rest of the eurozone.

The appeal court found that the courts were not entitled to interfere with the decisions of the ombudsman unless he made an error in law.


Mr Justice Peter Kelly, one of the three appeal court judges, agreed with the ombudsman.

The phrase “in line with general market interest rates” was not in the terms and conditions of the Millars’ mortgage contracts, he said.

Their contracts say rates are altered in response to market conditions and may change.

Mr Justice Hogan was wrong to refer to market conditions generally, he said.

The ombudsman had been correct in rejecting the contrived construction which the Millars sought to place on the mortgage contract, he added.

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