By Andy Sambidge
Group of 64 customers claim bank is in wrong after changing interest rate calculations.
A group of Mashreqbank customers is seeking talks with the UAE central bank to voice concerns about the bank's interest rate which they claim have raised monthly payments by as much as 30 percent.
Sixty four customers are calling for a meeting with central banks officials to argue that Mashreq violated terms of variable rate mortgage agreements when it switched its base for calculating its charge from the Emirates interbank offered rate (Eibor) to an internally set one, UAE daily The National reported on Thursday.
“We seek an urgent meeting to discuss the contents of this letter and to table our concerns with the Central Bank to prevent matters proceeding to court action which could be detrimental to the investor-friendly image of the United Arab Emirates,” said the letter obtained by the paper, which plans to be sent out on Thursday.
The paper reported that one Mashreq customer said the bank’s move raised the spectre of even more defaults as customers being asked to pay more were pushed to the brink.
The dispute began after Mashreq sent a letter to customers in November saying it would abandon Eibor starting this month.
Mashreq argued that the rate no longer reflected its overall cost of funding, necessitating the switch, the paper said.
The six-month Eibor stands at 2.2 per cent, down from 4.7 per cent in November of 2008.
Douglas Beckett, the Mashreq chief of retail banking, told The National earlier this month the switch would result in increased payments for about a third of its customers.For all the latest market news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
I'm glad to learn about this attempt to talk to the Central Bank. I am a Mashreq mortgage customer who is also affected and I would like to know how I could join the group to voice my concerns as well. Mashreq must not be given the free reign to alter policies only to suit their benefits.
Banking is a business and bank takes risk on customer by offering them their products. Similarly, customer takes risk by investing borrowed money. In a way, both lender and customer have agreed to take joint risk but on different product, one is on customer and one is on investment. It was the offer of the bank that influenced a customer to take the risk. If offer of bank had not been available, the customer would not have invested money to take the risk. Risks are always associated with profit/loss (this needs to be explained to all banks). It is not necessary that every risk result in a profit. In mortgage, when bank has offered a rate (variable linked with EIBOR) at the time of investment, they encourage the customer to take the risk, which he took after calculating the risk based on the bankâ€™s offer. If customerâ€™s risk went wrong in short term, it does not mean the bank will also share the risk and pardon certain portion of loan amount. Similarly, it is completely unfair and unethical practice on bank to make bankâ€™s risk profitable by forcing customer to pay higher interest amount by unilaterally modifying the terms of contract. Mortgage is generally a long-term contract, where markets are bound to change, a bank cannot keep changing its rates and play with customer every time when there is change in market scenario. They should also share the risk with customer. Otherwise, if they are allowed to increase the rate, they should also share the fall in property value. This is big test for central bank of UAE, whether they help customer to gain confidence in the local banking system. I feel that if these practices are allowed, this will result in huge blow to the confidence over local banking system and will only multiply the problem in the end. This will remove the complete trust on banking products and will encourage people to take out their money out of this country.
to join the group taking this case to court contact firstname.lastname@example.org As an illustration here are the differences in mortgage payments for a customer holding a 5,000,000 AED mortgage Original Eibor Rate (5.13%) spread over 20 years Monthly payments = 33,361 AED Total Payments = 12 x 33,361 x 20 = 8,000,640 AED Total interest payments to Mashreq = 3,000,640 AED Revised MPR Rate (7.5%) over twenty year period Monthly Payments = 40,280 AED Total Payments = 12 x 40,280 x 20 = 9,667,200 AED Total interest payments to Mashreq = 4,667,200 AED to Mashreq = 56% increase in interest paid to bank Mashreq Assist Rate (7%) over 30 year period Monthly Payments = 33,265 AED Total Payments = 12 x 33,265 x 30 = 11,975,400 AED Total Interest Payments to Mashreq = 6,975,400 AED to Mahreq = 232% increase in interest paid to bank
It is strange that on one hand Mashreq bank is increasing the rate of interest giving the reason that Markets are Volatile and other hand it goes on Distrubuting 1 million dirham draw every month and 10 million Dirhams final draw- heavy promotions are going on everywhere on Radio's, Hoardings. I wonder from where does the money come? It clearly proves that actually there is no volatile situation for this bank but they are only trying to take advantage of the recession. If there would have been really some situation, they should have considered this huge amounts in covering losses if any, least they should have bothered the customers who are paying the EMI's sincerely. At the end, this is just the example for those customers who want to invest in any of Mashreq promotions, not to get wooed away by these schemes which at the end will make them feel Sufferer like many of us.
Please ask them to close the bank. this is a rude behavior.
I am also a mortgage customer of Mashreq Bank and have already post a complaint about Mashreq to Central Bank in Dec.'09, And I didn't receive any feedback so far. Any how I am here also ready to join the group to include my voice to them my contact number 050 7861436
My Mortgage is with RAK bank and they have been following their "Internal decided rate" from day 1 of mortgages. They of course continue to enjoy the low lending rates set by the central bank for their cash requirements. RAK is not linked to LIBOR/EIBOR/$% RATES or anything else. They calim to look at these but in reality...The chairman walks out onto his balcony one morning says hmmmm I could do with a bit more cash and then raises the rates accordingly or something along those lines. It seems now that you are not even safe if you take a mortgage out with banks that are tied to something like EIBOR. My heart goes out to the Mashreq customers but sadly I have been there from day 1 (4 YEARS AGO) when RAK had the lowest rates to rake people in and then wooooosh! up went the rates!
The funny thing with Mashreq Bank an article was published by Gulfnews paper showing that Mashreq had make easy for his customers to pay there loans???!!!!! Please contact me on my mobile phone 050 786 1 436 to include my voice to you for togother will complain again to Central Bank Of UAE
I am also an affected customer of Mashreq...add me to your list! 050 8860168
to those who go and actualy complaint about mashreq bank to the centeral bank,well the boss of mashreq bank is 1 phone call away from central bank boss,while you are atleast you need like to pass a 1000 phone call to get to an answer machine that would tell you " sorry you are trying to hard " good luck poeple with complaining