RTE news today reports that AIB Bank (one of the largest banks in Ireland) has admitted an error in applying interest rate changes over a 12 month period to so-called ‘tracker’ mortgages.

This has resulted in customers having underpaid their loans in recent months. The bank is, kindly, offering the affected customers the option of paying the shortfall in one go or spread over the remaining period of their mortgage.

‘Manual Error’ is blamed for the problem, which (according to RTE) affects 500 customers.

Tracker mortgages track the base rate of a specific Central Bank (in Ireland this is the European Central Bank), with a fixed margin payable on top of the base rate.

[Update] The Irish Times this morning reports that the Irish Financial Services Regulator is to examine the Bank’s approach to recouping the under-paid mortgage amounts. Quoting a spokesperson for the Regulator:

“In instances where an institution is seeking to recoup money as a result of the failure of its own internal systems we would expect it to be flexible in terms of the arrangements it comes to with consumers”

This story is also carried in the Irish Examiner news paper today