Fears are rife that Bank of Ireland borrowers could be pushed into repossession after the lender announced that it is increasing its SVR from 2.99% to 4.49%.
Last week the bank notified customers that it was raising the SVR on its UK residential mortgage book by 1% in June to 3.99%, and by a further 0.5% in September to 4.49%.
For a borrower with a £100,000 loan on a 15-year term, this would add £77.87 to their monthly payments on a repayment basis, or £125 on an interest-only basis. The change will affect 100,000 borrowers but Post Office customers will not be affected.
Bank of Ireland stopped lending in 2009 but is still the exclusive provider for the Post Office.
Ketan Yadav, specialised lending director at Avenue & Co Private Finance, says the change will hit many borrowers hard.
He says: “One of my clients will see her monthly repayments rise from £722 per month to £1,095 per month – a 52% hike. She is a mortgage prisoner as she is self-employed and her husband is no longer working so she would be unable to meet lenders’ criteria for remortgaging and has little equity in her property.
“A whopping rate hike like this with little notice is likely to lead to a significant increase in repossessions in the next 12 to 18 months.”
Fahim Antoniades, group director at Mortgage Centre IFA, says: “For borrowers who are only just affording their mortgage payments, this could be the straw that breaks the camel’s back.
“The good news is that it will lead to more remortgage business for brokers but with mortgage rates on the rise borrowers may struggle to find a cheap deal elsewhere.”
Bank of Ireland is recommending clients go to London & Country for mortgage advice.
Also last week, Clydesdale and Yorkshire banks revealed they would be raising their SVR from 4.59% to 4.95% on May 1.