MortgagesMay 15 2013

Borrowers take action over ‘unfair’ rate hikes

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An organisation that represents landlords has received over 300 requests, many from residential borrowers, to join a legal action against the Bank of Ireland following its mortgage rate hikes.

Landlord Action is now presenting a case to the Office of Fair Trading and the Financial Conduct Authority, claiming that raising rates on lifetime tracker mortgages is a breach of the Unfair Terms in Consumer Contracts Regulations 1999.

Justin Selig, director of Landlord Action, said: “Although our main focus is on consumer landlords, we’ve had a lot of enquiries from regular borrowers, since they’ve been affected in the same way. We’ve obtained legal advice and have been told the bank is in breach of regulations for all those borrowers who can be classified as ‘consumers’.”

Mr Selig, director of London-based solicitors The Law Department, said borrowers in the legal action were seeking a reversal of the rate rises or damages equivalent to the higher level of payments multiplied by the number of months left on the mortgage.

Bank of Ireland and Bristol and West wrote to 13,500 UK mortgage customers in February informing them of its decision to increase the interest rate differential on their Base Rate Tracker mortgages.

It said the margin over the Bank of England base rate would double on 1 May. The rate increase applies to all those who took out tracker rate mortgages before 31 October 2004.

Right to reply

A spokesman for the BoI said: “We are aware that some customers will find this increase difficult and we ask these customers to contact us directly and we will review all options open to them. Should a customer decide to take legal advice in relation to this increase, they are entitled to do so and the Bank will deal with any legal proceedings through the proper legal channels.

“This increase is permitted by a specific clause in these mortgage contracts, which allows an increase in the interest rate differential after the guarantee period (after 31 December 2006). This clause was clearly referenced in the pre-sale offer document provided to the customer and the customer’s intermediary prior to completion.

“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. This rate increase does not affect Post Office customers.

“BoI has a range of mortgages available to customers who would like to review their mortgage options. If a customer decides to move to an alternative mortgage provider, no early repayment charges will apply.