Mortgage interest to double for thousands of borrowers as banks impose huge tracker rate hikes

Thousands of Bank of Ireland and Bristol & West borrowers customers face a doubling of interest on mortgage interest payments this year after the banks decided to ramp up tracker rates.
Buy-to-let borrowers are being hit by a bigger hike than residential customers: they will see their mortgage rate jump to 4.49 per cent on top of Bank of England base rate - or 4.99 per cent compared to the current rate of 2.25 per cent (base rate plus 1.75 per cent).
Residential customers were also paying 2.25 per cent but face a smaller hike, to 2.99 per cent (base rate plus 2.49) on 1 May 2013. But the tracker rate will then increase again to 4.49 per cent (base rate plus 3.99 per cent) from 1 October 2013.

Bank of Ireland: Hiking tracker mortgage rates for both buy-to-let and residential borrowers

The move will add £240 per month, or £2,850 year on a £200,000 mortgage. Some 15,000 customers in total will be affected.

 

In a letter to customers, the lenders – which are part of the same bank - state: ‘Currently banks are required to hold more capital reserves, as part of measures to protect the banking system from the type of scenarios seen during the banking crisis.

'OUTRAGED' AT THE MOVE

Jane Clemetson, a lawyer from London, has had a mortgage with the Bank of Ireland since 2004 for a buy-to-let property she owns and rents out in Grimsby, Lincolnshire.
She is ‘outraged’ that this hike has been administered, but does concede that after reading through her terms and conditions that it does say it can do this – if they need to ‘shore up its business’ – although her attention wasn’t drawn to it at the time.
She said: ‘It’s outrageous and will cost me, I estimate, over £1,000 a year although they haven’t told me yet how much it my new monthly payment will be.’

‘In addition, the cost of funding mortgages has increased significantly for Bank of Ireland and the market as a whole in recent years.
‘Your loan agreement has a special condition which allows us to change the tracker differential for a number of valid reasons including the ones mentioned above.’
The letter goes on to state that if you choose to remortgage to another lender, early repayment charges will be waived.
Tracker mortgages are meant to remain fastened to the official Bank of England base rate, which has been sat at its historic 0.5 per cent low since March 2009, or another official index.
The moves comes after it emerged earlier this week that the Bank of England have been mulling over the idea of negative interest rates.
The bank says the City watchdog, the Financial Services Authority (FSA), is fully aware of the changes to the tracker mortgages.
This time last year, it raised its standard variable rate (SVR) from 2.99 per cent to 4.49 per cent in a move that affected 100,000 customers.