Is this a warning of things to come? Bank of Ireland doubles tracker rate mortgages overnight affecting 13,500 UK customers

Source: DailyMailOnline
Thanks to L.

  • Huge hike despite Bank of England base rate at historic low of 0.5%
  • Consumer group Which? describes move as ‘wholly unfair’
  • Urges customers to complain to bank and Financial Ombudsman

By STEVE ROBSON

PUBLISHED: 18:56 GMT, 1 May 2013 | UPDATED: 10:13 GMT, 2 May 2013

Thousands of homeowners are facing a huge increase in their mortgage repayments after the Bank of Ireland doubled rates overnight.

Borrowers are being urged to complain to the bank and the Financial Ombudsman after the move which comes despite the Bank of England base rate remaining at a historic low of 0.5%.

Consumer group Which? says the change, which will affect some 13,500 UK customers, is ‘wholly unfair’.

Thousands of homeowners are being affected by the Bank of Ireland's decision to increase mortgage ratesThousands of homeowners are being affected by the Bank of Ireland’s decision to increase mortgage rates

The Bank of Ireland (BOI) has been contacting those affected – most of whom have a buy-to-let loan – about the changes, which take affect from today.

But consumer group Which? believes they are being treated unfairly, pointing out that some were sold a ‘lifetime tracker’.

It says customers should complain to the bank and if they are not happy with the response take the matter to the Financial Ombudsman.

Which? accuses BOI of justifying the changes on the basis of ‘clauses buried in the small print of mortgages’ which were taken out before October 2004.

Which? executive director Richard Lloyd said this was ‘wholly unfair’ and said BOI was ‘taking advantage of its customers by hiking rates at a time when the base rate is static’.

He added: ‘Customers should complain if they were led to believe they had bought a ‘lifetime’ mortgage and Bank of Ireland must deal with these complaints quickly and fairly.’

Mr Lloyd urged the Financial Conduct Authority to ensure that all banks communicated important clauses to their mortgage customers and called for better protection for homeowners in consumer legislation.

Some homeowners will see their repayments double overnight, despite the Bank of England base rate remaining at a historic low of 0.5%Some homeowners will see their repayments double overnight, despite the Bank of England base rate remaining at a historic low of 0.5%

A typical change will see a buy-to-let mortgage holder who is currently on a rate of 2.25% – made up of the base rate plus 1.75% – see it rise to 4.99% from today, representing the Bank rate plus 4.49%.

For residential customers, changes will be introduced in two stages. From today, they will pay the Bank rate plus 2.49%. On October 1, it goes up to Bank rate plus 3.99% – currently 4.49%.

One customer, Gary Smith, from Colchester, Essex, told the BBC he faced having to pay an extra £280 this month and a further £200 in October – after taking out a £200,000 mortgage with Bristol and West (a wholly owned subsidiary of the Bank of Ireland) in 2004.

He said: ‘It was sold and marketed as a tracker rate. I thought I had that margin for life. It’s all very frustrating.’

BOI blames the rise on increase funding costs and the need for banks to maintain greater levels of capital. It has set up a phone line for anyone worried about the impact of the changes.

The changes affect seven per cent of BOI’s UK mortgage customers, the lender has said.

The bank said: ‘This increase is permitted by a specific clause in these mortgage contracts, which allows an increase in the interest rate differential after the guarantee period (i.e. after 31 December 2006).

‘This clause was clearly referenced in the pre-sale offer document provided to the customer and the customer’s intermediary prior to completion.’

It said customers were free to move to other providers and no early repayment charges would apply.

However tightened mortgage criteria and falling house prices may mean some struggling to find new deals.

The rate increases do not affect customers who have taken out a mortgage through the Post Office, which has a financial partnership with the bank.

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5 Responses to Is this a warning of things to come? Bank of Ireland doubles tracker rate mortgages overnight affecting 13,500 UK customers

  1. Bill says:

    I wonder if in Ireland the banks probably have default insurance there by foreclosing for the insurance for the full term! so say a 200,000 full term payback would be 450,000- 550,000 and they get your house! So unless the insurance steps up to protest or calls foul the banks will do better than ever! Here in U.S. that is how it works and I am sure the insurance industry is suffering or in collusion in some way! But you can see the motivation they would have by doing this!

  2. Jean, I haven’t been getting any email from you, I always pass them to my mail list and am wondering if someone has removed me from your mail list. Could you please check this out for me and if I’ve been removed please add me back on your list.
    Thank you,
    we2rready@aol.com

    • Jean says:

      Nancy, I have no way of checking this. You can always sign up again – and unsubscribe, as well. I think when you receive an email from me there is a place on it somewhere where you can unsubscribe. I don’t really know, though, but I believe that’s what others have shared in the past. I hope this is helpful . . . Hugs, ~Jean

  3. Hi Jean,
    I live in Ireland and am a typical middle class small business owner. Nearly all small business owners or professionals (like doctors, lawyers and dentists) that I know here in Ireland have borrowed heavily to invest in the property boom/bust here with the availability of dirt cheap interest rates. The party is over. We are all underwater now and are so broke that the banks here will be lucky to get 10% of their loans repaid ever! This contagion will burst the financial system everywhere. I had some properties revalued recently at only 20% of their 2007 value. My guess is that the banks don’t want em back in a hurry. Check out http://www.boombustblog.com

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