Bank of Ireland doubles and triples tracker mortgage payments – The Guardian
OUCH!
If you’re sitting pretty on a tracker mortgage, you may not be feeling quite so comfortable after you’ve read about what happened to Gary Smith. On Wednesday he found out that his monthly mortgage bill will be shooting up from £243 to around £780 after his lender announced it was invoking a little-known clause in his loan agreement.
And he’s not the only one. Around 13,500 of Bank of Ireland‘s UK customers will see their monthly mortgage costs soar as a result of the changes being made to some of its base-rate tracker deals. Some people’s bills will double or triple. Almost half hold standard residential home loans, while the rest are buy-to-let landlords, some of whom have perhaps as many as a dozen or more mortgages.
Smith, 41, currently enjoys a rate of 1.39% (made up of the Bank of England base rate plus 0.89%) but was shocked to receive a letter stating that this will jump to 2.99% in May, and then leap again to 4.49% in October. That’s despite the fact that the Bank of England base rate, which his mortgage deal tracks, has been at a historic low of 0.5% since March 2009 and seems unlikely to rise for several years. In other words, he will soon be paying more than three times what he does now.
Customers took to Twitter and internet forums to express their anger, and there is already talk of a possible legal challenge. “Is this legal? It feels more like robbery. How can they change a contracted agreement just to pay for their shortcomings?” said one poster on the MoneySavingExpert.com website. Another, a married father-of-two, said his monthly bill was rising from around £300 to £770, and added that he feared they could end up being repossessed as they were already in arrears. “I have no choice other than to stay with them. I am unmortgageable with any other lender … I feel very close to the edge,” he said.
Some of those affected warned that other mortgage lenders might decide to follow suit. Tracker mortgage customers with other banks went scurrying off to dig out their paperwork to see if there was anything that might mean they could be similarly clobbered.
Bank of Ireland said it was increasing the interest rate “differential” (the extra percentage on top of the base rate) on a proportion of its tracker mortgages in the UK. The rate hike will be applied in two stages for residential customers such as Smith, who lives near Colchester, Essex. From 1 May, the new differential will be 2.49%, rising to 3.99% on 1 October.
Buy-to-let borrowers will suffer the increase all in one go. They typically pay around 2.25% (base rate plus a 1.75% differential) but will see this jump to 4.99% on 1 May. The bank said it was triggering a “special condition” clause in loan agreements that, it said, allowed it to increase the differential.
Smith says what’s happening to him, and the other borrowers, “strikes me as very unfair.