Treasury Investigates Tracker Mortgage Increases

Treasury Investigates Tracker Mortgage Increases.

Following the Bank of Ireland’s shock announcement that it is increasing the underlying rate on its tracker mortgages for both residential mortgages and buy to let mortgages last week, the Treasury Select Committee chairman, Andrew Tyrie, has issued a formal letter to the financial regulator, the Financial Services Authority (FSA), demanding an investigation.

Bank of Ireland is increasing tracker rates as follows:

• Residential: 1.75% over base rate to 2.49% over base in April and 3.99% over base in October. With Bank of England base rates currently at 0.5% pa, this means that borrowers could see increases from 2.25% pa currently (1.75% + 0.5%) to 4.49% pa (3.99% + 0.5%), a doubling of mortgage payments in just 6 months.
• Buy to Let: 1.75% over base rate to 4.49% over base. This means that borrowers could see increases from 2.25% pa currently (1.75% + 0.5%) to 4.99% pa (4.49% + 0.5%), more than doubling of mortgage payments.

Our view

We welcome Mt Tyrie’s intervention, but we are sure Bank of Ireland will have taken the right legal and compliance advice to ensure the small print on their mortgage contracts is sound. That said, Bank of Ireland has a duty to treat all customers fairly and we will wait to see how this develops. Given that Bank of Ireland mad £1.8bn in losses last year, we cannot see them backing down. They need to protect consumers but also the business needs to be run.

Bank of Ireland are allowing all borrowers to remortgage elsewhere without penalty.