Thousands face mortgage rate rise
Published 28/02/2013 | 18:56
Thousands of homeowners with a Bank of Ireland mortgage are facing steep hikes to their payments from May, as the lender doubles the rates on some home loans.
The bank has been contacting the 13,500 customers who will be affected by the rate increases on its base rate tracker mortgages, most of whom have a buy-to-let loan.
The announcement, which has provoked anger, comes despite the Bank of England base rate being held at a record 0.5% low for four years.
The changes mean that a buy-to-let mortgage holder who is currently on a typical interest rate of 2.25%, made up of the base rate plus 1.75%, will see their rate climb to 4.99% from May 1. Residential mortgage customers will see their rates eventually jump to 4.49% based on the current Bank rate.
The increase will be introduced in two stages for residential customers. From May 1, the rate will be the Bank rate plus 2.49%, followed by another rise to the Bank rate plus 3.99% on October 1. Buy-to-let customers will see their rate increased to the Bank rate plus 4.49% on May 1.
The changes affect 7% of Bank of Ireland UK mortgage customers, and most of those affected have large amounts of equity, amounting to 40% or more, said the lender. The move comes at a time when many mortgage lenders have slashed their rates as a result of a Government scheme to unblock lending.
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.
Andrew Montlake, a director at broker Coreco, described the move as "shocking".
He told the BBC: "At least affected borrowers are coming out into a competitive rate environment with options, but this is a further kick in the teeth to those borrowers who, through changes in circumstances, would find it difficult to move on."
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.