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Trackers don’t track and fixes move: The truth about mortgage deals


Thousands of Bank of Ireland mortgage customers are to be hit with higher repayment costs on their tracker mortgages, whether the Bank of England Base rate changes or not.

The lender has announced rate hikes to take effect from May, seeing rates for 13,500 customers on base rate tracker deals double.

The changes mean that a buy-to-let mortgage customer on a typical interest rate of 2.25% will see their rate climb to 4.99% from May 1.

Residential customers will see increases introduced in two stages: 2.49% plus base rate will take effect from May 1, changing again to base rate plus 3.99% on October 1, jumping to an overall rate of 4.49% if the base rate stays at 0.5%.

No rules broken

But the most shocking part is that they have invoked small print terms and conditions to make the changes and not broken any rules by doing so.

Others lender could make the same changes. Considering there are hundreds of thousands of homeowners with a tracker mortgage in the UK, it’s a worrying sign.

Bernard Clarke, spokesman for the Council of Mortgage Lenders, said: “Clearly, the extent to which lenders can vary borrowing rates – or other mortgage terms – is set out in the contract with the borrower.”

But the only official stipulation is that lenders must give customers reasonable notice before changing rates, according to rules issued by market regulator the Financial Services Authority (FSA).

Ray Boulger, mortgage expert at broker John Charcol, said to Sky News: "It’s extremely shoddy practice… If the Bank of Ireland was looking for a way to maximise the distrust of banks, they have succeeded.

"The Bank of Ireland needs to explain why they think they can get away with this… If you enter into a contract and you say you'll provide funds at a certain rate and, during the terms of that contract conditions change, that's bad luck," he said. "It’s a business risk that banks take on when they offer mortgages."

In September last year, Santander changed the maximum amount it can charge above base rate on its Standard Variable Rates (SVR) base – from 3.75% to 4.99% - to allow it to move the underlying rate up to 4.74%.

Customers will no doubt question what the point of a contract is when a lender can apparently change the terms at any time.

Bank of Ireland blamed the rises on increased 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 rate increases do not affect customers who have taken out a mortgage through the Post Office, which has a financial partnership with the bank.

Customers who are concerned about the impact of the increase can call the Bank of Ireland's phone line on 0800 345 7512.

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