Bank of Ireland borrowers have heavily criticised the lender’s decision last week to hike rates for thousands of tracker mortgage customers, with one branding it “repugnant” and damaging for the UK financial services industry.
The bank is writing to 13,500 buy-to-let and residential customers on tracker mortgages to warn them of its plans to more than double the base-rate differential it charges.
For buy-to-let borrowers, the rate will jump from Bank of England base rate plus 1.75 per cent to rate plus 4.49 per cent from 1 May.
For residential borrowers, the increase will come in two stages, culminating in a new figure of base rate plus 3.99 per cent on 1 October.
The BoI says the changes reflect the significant increase in the cost of funding these mortgages since 2008 and cites a “special condition” in its mortgage contract that permits the hike.
Brightstar Financial chief executive Rob Jupp is one of the affected BoI customers and he argues that the rate increase goes against the principles of treating customers fairly.
He says: “I would be surprised if there was not a class action against Bank of Ireland as mortgage borrowers come together to try and seek alternative legal advice against them.
“I feel very strongly about this kind of action as a loyal and long-standing customer of Bank of Ireland.
“This is utterly repugnant and puts the UK financial services market into ill repute when a lender can change the terms of their contract so massively purely for commercial gain.”
Jupp adds that he intends to pursue a complaint against BoI via the Financial Ombudsman Service, having already made a complaint to BoI which was dismissed.
A BoI spokeswoman confirmed that the bank’s terms and conditions allow for a differential increase if “30 days’ notice has been given or for any other valid reason” as long as the guarantee period, during which the bank has agreed with individual borrowers not to increase the differential has passed.
The guarantee period for the 13,500 borrowers recently notified finished in 2006.