Thousands of borrowers with the Bank of Ireland will see their mortgage costs all but double.
Some 13,500 mortgage borrowers of Bank of Ireland are to have rates hiked on their Bank Base Rate tracker mortgages. The bank blames the cost of providing the mortgages, together with capital requirement rules.
The increase, which would add another £3,000 a year on to a £200,000 mortgage, affects about 7% of the bank’s total customers, and will hit mainly buy-to-let borrowers, but also those residential customers who have tracker products.
Residential mortgage borrowers are currently paying Bank of England Base Rate (BBR) plus 1.75% – a total of 2.25%. They will have their rates hiked to 2.49% above BBR on May 1, with a second increase on October 1 to 3.99% above BBR.
Rates for buy-to-let customers will be hit with the bigger hike. They too are currently paying 2.25% but their rates will rise to BBR plus 4.49% on May 1.
Broker Andrew Montlake, of Coreco, said: “This is a shocking move by the Bank of Ireland and, it could be argued, shows a blatant disregard for the fortunes of their customers.
“One of our clients has been hit with a sudden rise of 2.74% on a rental property that was ticking along nicely, which increases payments by £776 per month.
“It is evident that they want to reduce their back book and dispense with clients they do not see as profitable, but there must be a less dramatic way to do this.”
In a statement, the bank said: “This change reflects the significant increase in the cost of funding these mortgages since 2008 and the need for banks to maintain greater levels of capital.
“These changes will affect 7% of Bank of Ireland UK mortgage customers, the majority of which are buy-to-let customers.
“All Bank of Ireland mortgage holders affected by the increase are being notified about the changes.”
All of the mortgages were taken out prior to 2004, including those with the Bristol & West Building Society, which was taken over by the bank in 1997 and continued as an intermediary-only brand before closing its books to new business in 2009.
Most of the borrowers are said by the bank to have significant equity in their properties.
While it is thought that many being hit by the hike will try to remortgage before their costs soar, some could struggle to remortgage to a cheaper rate if they took out self-certification deals.
In its letter to affected borrowers this week, the bank says: “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.
“In addition, the cost of funding mortgages has
Article courtesy of Landlord Today