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Court Finds in Couple´s Favour in Mortgage Interest Rate Increase Dispute

Posted: November 5th, 2014

The High Court has found in favour of a Dublin couple in a mortgage interest rate increase dispute and instructed the Financial Services Ombudsman to review its decision.

Mr Justice Gerard Hogan gave his instruction to the Ombudsman in the recent Millar -v- Financial Services Ombudsman case at the High Court, which had been brought by Kenneth and Donna Millar from Portmarnock after a complaint made against Danske Bank by the couple had been rejected by the Ombudsman.

In their complaint to the Ombudsman, the Kenneth and Donna had claimed that the Danske Bank was in breach of contract due to raising the mortgage interest rate on their six investment mortgages and a mortgage on their family home in November 2011 at a time when the Central European Bank was reducing interest rates to a historic low.

The Millars claimed that – under the terms of their seven mortgage agreements – their lender was only supposed to adjust interest rates “in line with general market interest rates”. However, when the Millars disputed the mortgage interest rate increase, they were told by that the European Central Bank´s interest rates had no influence over what the Danske Bank could charge.

The Millars argued that – at the time they had taken out their first variable interest rate mortgage – the literature provided to them claimed “When interest rates go down, your monthly payments do likewise. However, when interest rates rise, your monthly payments will increase too”. Although the mortgages had been originally taken out with the National Irish Bank, they expected the Danske Bank to honour their contract after they had taken over control of the National Irish Bank.

The Millars pursued their mortgage interest rate increase dispute with the Financial Services Ombudsman, who rejected it on the basis that the applicable clause in their mortgage agreements stated that the lender would amend the mortgage interest rate “in response to market conditions” and not “in line with general market interest rates”.

The case went to the High Court before Mr Justice Gerard Hogan, who disagreed with the Financial Services Ombudsman´s rejection of the Millar´s complaint. The judge sided with the Millars in the mortgage interest rate increase dispute, stating that the text of the clause in question was ambiguous in the “general factual background against which the contract was entered into”.

The Judge dismissed the Ombudsman´s review of the dispute and told the Ombudsman to conduct another review of the Millars´ complaint “in a manner not inconsistent with this judgement”. The full content of Judge Hogan´s verdict can be read here.

The Implications of Judge Hogan´s Decision

By siding with the Millars in the mortgage interest rate increase dispute, Judge Hogan may have opened the door for Ireland´s estimated 207,000 property owners that have variable interest rate mortgages to challenge the interest rates charged by their lenders – subject to an ambiguous clause in their mortgage agreements.

It is noticeable that Mr Justice Gerard Hogan did not find Danske Bank to be in breach of contract or instruct the bank to reveal how the Millars were assessed. However thousands of homeowners in Ireland may be able to start their own mortgage interest rate increase dispute, knowing that there is a precedent if the Financial Services Ombudsman fails to find in their favour.

If you are one of the thousands of homeowners in Ireland who have found their variable mortgage interest rates increasing without due cause, and you would like to find out more about starting a mortgage interest rate increase dispute, you are invited to call our 24 hour helpline to speak with a solicitor experienced in the financial services sector. Only then will you find out if you have been paying too much for your mortgage and what can be done about it.

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