Fos upholds BTL tracker complaint against BoI
The Bank of Ireland did not have the power to change the interest rate differential to its buy-to-let tracker mortgage, Fos has ruled, following a complaint to the service.
A couple, known as Mr and Mrs J, had ported to a new property an existing mortgage they had with the bank in 2002, which had been for £90,000 and at a capped interest rate until 2003, when it reverted to the bank’s standard rate.
In 2002, they borrowed an additional £275,000, which tracked the Bank of England base rate plus a differential of 1 per cent.
But in 2013, the couple were told the bank had increased the differential to 2.49 per cent from May of that year, and then to 3.99 per cent from October.
The couple believed this hike was unfair and took the complaint to Fos. Initially, a Fos adjudicator had deemed it was reasonable for the bank to raise the differential as per its terms and conditions, which the couple said they had not seen.
Later, however, ombudsman Simon Pugh said in his ruling: “The bank did not have the power, and it was not fair and reasonable for it to have done so.”
He instructed the bank to rework the loan “as if the increase had not happened”.
“The bank should do this either by refunding the overpayments or by reducing the capital balance on that loan,” he said.
Mr Pugh accepted that the bank had valid reasons to alter the differential, which had been laid out in the terms and conditions, and that the amount was not unreasonable.
However, he said the bank could not prevent the couple from moving the mortgage to another lender, which they could do without any exit charges within six months of the ruling.
The bank agreed to waive the fee, which the ombudsman said was “a fair and reasonable way” to resolve this part of the complaint.
Background
In February 2013, the Bank of Ireland announced it had notified 13,500 customers of increases in the differential on its base rate tracker mortgages.
At the time, Which? said it had received numerous complaints. It said it was unfair to hike its rates “based on clauses buried in the small print”, and called on clients to complain directly to the bank.
Note: We have been asked to point out that the mortgage in question was a residential tracker mortgage, not a buy-to-let tracker mortgage.
