MP urges action over B of I move to raise UK tracker rates
A British parliamentary committee is probing the decision by Bank of Ireland’s UK division to significantly increase the interest rates on 13,500 tracker mortgages despite the base rate remaining unchanged.
Andrew Tyrie, chairman of the influential Treasury Select Committee, has asked the Financial Services Authority to explain what action it plans to take against the Irish bank.
In a letter sent to Martin Wheatley, managing director of the FSA, Mr Tyrie asked what contacts and discussions had been held with Bank of Ireland, and at what level of seniority. “Will you be investigating whether the mortgage agreements concerned contained unfair clauses?” Mr Tyrie queried.
Letter to FSA
Mr Tyrie’s one-page letter, sent on Wednesday, also demands to know if the FSA will be treating this as a case of “product mis-selling”.
“What discussions will you have with the prudential regulation arm of the FSA about the Bank of Ireland’s claim that the interest rate rise is a result of increased capital requirements?” he asked.
He has also sought an explanation as to what discussions have been had with the financial ombudsman service about Bank of Ireland’s decision.
Mr Tyrie requested that Mr Wheatley respond to his letter by this Monday, March 11th.
Bank of Ireland last week increased charges for UK tracker customers, leading to fury among affected borrowers. The customers had assumed their tracker rates could not be increased unless there was a rise in the base rate.
However, Bank of Ireland triggered a “special condition” clause contained in loan agreements that, it says, allows it to increase the interest rate “differential” on some of its UK base rate tracker mortgages.
The bank has increased the margin over base rate from 1.75 per cent to 3.99 per cent.
The changes mean that a buy-to-let mortgage holder enjoying an interest rate of 2.25 per cent (comprised of the Bank of England base rate, which is 0.5 per cent plus a 1.75 percentage-point differential) will be paying 4.99 per cent. Some residential mortgage customers are paying a rate of 1.39 per cent or less, and will see this jump to 4.49 per cent.
No comment was available from Bank of Ireland yesterday. The bank has indicated that it engaged with the FSA over the tracker rates.