Bank of Ireland increase Tracker mortgage rate

Last post: Feb 28, 2013

A rate increase from Bank of Ireland

The Bank of Ireland is invoking its right to increase the interest rate differential of some of its UK base rate tracker mortgages due to a 'special condition' clause included in its contracts.  The increase will see most customers' monthly mortgage costs almost tripling in the next two months. The bank claims that the change is due to the significant increase in costs since 2008 to fund these mortgages and the need of banks to maintain higher levels of capital.  Almost 7% or more than 13,500 mortgage customers will be affected by these changes which will start as early as the first of May. More than half of these mortgages are buy-to-let holders who will see their interest rates increase from 2.25% to 4.99%.  The rate as of now is composed of the current Bank of England base rate of 0.5% plus 1.75%, but come May it will increase to base rate plus 4.49%. Residential borrowers, on the other hand, will get a lower increase that will be applied in two separate stages.  First increase would be a base plus 2.49% change in May, then a base plus 3.99% increase by October. Bank of Ireland is currently informing all affected customers through post and has dedicated a support line (0800 345 7512) to handle any questions and any concerns about these changes. While this is an unwelcome move its impact may be greater if other Lenders now start to examine the finer print within their Tracker mortgages and determine that they have flexibility to do the same. This would mean the many tens of thousands of customers of banks who issued Tracker mortgages at Base rate plus (or even LESS) a small percentage  could have their very cheap mortgages affected. For these banks such mortgages have become and expensive liability and they are actively seeking ways to entice, cajole and even bully people to remortgage at prevailing rates. This move by Bank of Ireland could therefore have a much wider impact in the future.