Michael McGrath (Cork South Central, Fianna Fail)
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That is, therefore, the case. I will take, by way of example, the contract I shared with the witnesses before the meeting resumed. The extract I provided is from an Allied Irish Banks mortgage contract with one of the 4,000 customers in the category identified by AIB as being within scope. I understand the customer in question will receive the compensation offer of €1,000.

I just want to give my interpretation of it. When I read clause 3.2 in the contract which deals with what happens after the fixed rate period has expired, it states that at the end of any fixed interest rate period the customer may choose between (a), (b) and (c), where (a) is a further fixed interest rate period, (b) is conversion to a variable interest rate mortgage loan and (c) is conversion to a tracker interest rate mortgage loan. Relating to all of them, it states it is at the bank's then prevailing rates appropriate to the mortgage loan. If the customer does not exercise this choice, the mortgage loan will automatically convert to a variable interest rate mortgage loan. There is no definition of what the prevailing rate is. Professor Lane has given us in broad terms the Central Bank's interpretation of it, which is supportive of the bank's interpretation. I put it to him that that completely ignores clause 3.6 which provides a very explicit definition of what a tracker interest rate mortgage loan is. If one takes clause 3.6.(i), the tracker interest rate is made up of two parts, the ECB's main refinancing operations minimum bid rate which is variable and the tracker margin as stated in Part 1 of the particulars of offer of mortgage loan subject to clause 3.6.(iii). Professor Lane does not have Part 1, but in this case, Part 1 states a margin of 1.1%. Clause 3.6.(ii) states a tracker interest rate applicable at any time will change within five working days of a change in the ECB rate, while clause 3.6.(iii) states the bank may adjust the tracker margin upwards if the valuation report values the property at less than the property price estimated value shown in the particulars of offer of mortgage loan. That is not the issue in dispute as that does not apply, but we have very clear definition on what a tracker mortgage is. In the context of this mortgage contract, the tracker interest rate is the ECB rate plus the tracker margin which is stated elsewhere in the mortgage offer and which in this case was 1.1%.

If we go back to clause 3.2, it is very clear what the options are for the customer at the end of the fixed-rate period, namely, a further fixed rate period, conversion to a variable interest rate mortgage loan or conversion to a tracker interest rate mortgage loan. It goes on to state "at the bank's then prevailing rates appropriate to the mortgage loan". There is no definition of what the prevailing rates are, what they mean or what can be interpreted from it, but there is a very clear definition in clause 3.6 of what a tracker interest rate mortgage loan is. I put it to Professor Lane that the interpretation the bank - AIB in this case - has put on the contract - this is replicated across a large number of the 4,000 customers - which the Central Bank seems to support has no regard to clause 3.6 which defines explicitly what a tracker interest rate mortgage loan is.