Bank of Ireland’s tracker mortgages!

by Mark Johnston

Bank of Ireland’s tracker mortgage!

Tracker mortgage deals have proved popular in recent years. These particular mortgages are supposed to give home owners peace of mind that their mortgage rate would not suddenly increase because the bank needed to boost its profit margins.

Currently the bank of Ireland has a range of tracker deals, with some customers paying just 1.74 per cent above the bank rate.

However, it appears that from May around 13,500 customers with a mortgage from either the bank of Ireland or Bristol and West face sharp increases in their monthly mortgage repayments.

This is due to these particular lenders are planning to double the interest rates on some of their tracker home loans.

Therefore from May this year all residential mortgage customers who have tracker mortgages with these lenders will see the rate they pay rise to 2.49 per cent above the bank rate, with a further increase to 3.99 per cent from October.

Despite the bank rate staying at 0.5 per cent for 4 years now, many mortgage brokers have said that this is an extraordinary move from the lenders.

It seems that the bank of Ireland has invoked ‘special conditions’ that allow it to increase the margin by which it tracks this rate.

A bank of Ireland spokesperson said the changes reflected “the significant increase in the cost of funding these mortgages since 2008 and the need for banks to maintain greater levels of capital”.

This is not however the first time something like this has happened, as just last year both Skipton building society and the Halifax also backtracked on similar guarantees which promised that their main mortgage rate would not be more than three percentage points above the bank rate.

According to some mortgage experts, customers may be able to challenge the decision made by the bank of Ireland and Bristol and West.

However, the bank of Ireland has already turned down a complaint that it had breached legislation on unfair terms and contracts.

The bank said that customers taking out these mortgages were told at the time in writing that the differential over base rate was only guaranteed until 2006.

Therefore it seems that the customers who are affected by this sudden rate change should be prepared to take their case to the Financial Ombudsman Service.

Ray Boulger, of mortgage broker John Charcol, said “much will depend on whether it was made clear to customers in advance that the bank of Ireland retained the right to alter the terms of their tracker deal. If it was not clearly explained then customers could argue that the move did not comply with regulations to ‘treat customers fairly’”.

Andrew Tyrie, chairman of the treasury select committee is concerned about the move and is anxious that other lenders might follow suit.

Other industry experts suggest that as there is now speculation that rates could be cut further, to 0.25 per cent, more lenders could be looking to utilise such clauses”.

This would mean that millions of home owners who have tracker mortgage deals could see their monthly repayments soar if other lenders do follow the bank of Ireland’s lead.

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