PARIS: Thousands of borrowers are set to make official complaints about a sudden increase in their mortgage rates, which takes effect on Wednesday.
The British Broadcasting Corporation reported on Wednesday that some customers of Bank of Ireland and Bristol and West will see their repayments double overnight.
The changes will affect 13,500 homeowners, who took out tracker mortgages as long ago as 2003.
BOI has defended its decision, saying that customers were warned about such rises in the small print.
But lawyers are now advising those people affected to make an official complaint about BOI to the Financial Ombudsman Service, in an attempt to obtain possible compensation.
Customers who took out tracker mortgages (in some cases they were called “lifetime trackers”) were told they would track the Bank of England base rate, plus a margin of, for example, 0.85 per cent.
Many were under the impression that the margin would stay the same, and hence the cost of their mortgages would only rise if the underlying base rate were to rise.
The base rate has remained at a record low of 0.5 per cent for the past four years.
So some borrowers are furious that typical repayment rates will rise from 1.35 per cent (0.5 per cent base, plus 0.85 per cent margin) to 2.99 per cent from May 1.
Residential customers will then face a further rise in October, to 3.99 per cent.
Gary Smith, from Colchester in Essex, took out a £200,000 mortgage with Bristol and West, a BOI subsidiary, in 2004.
He faces having to pay an extra £280 this month and a further £200 in October.
“It was sold and marketed as a tracker rate,” he told the BBC.
“I thought I had that margin for life. It’s all very frustrating,” he said.
Smith said he was not in a position to move his mortgage elsewhere, as his wife was now only working part-time and no other lender would grant a mortgage on his new earnings multiple.
Two-thirds of the customers affected are buy-to-let landlords, and they face an even steeper increase than residential borrowers.
Instead of facing a staged increase, they will be hit by a doubling of rates this month.
Colin Thody, from Mytchett in Surrey, is a buy-to-let landlord who believed he would pay 1.75 per cent over base rate for the lifetime of his mortgage.
This month, his mortgage repayment will increase from £270 to £600.
“I think the bank has acted in an immoral way and will cause many landlords serious financial problems,” he told the BBC.
Lawyer Justin Sellig is advising customers to complain to the Financial Ombudsman.
“People were sold a lifetime tracker,” he says.
“They were led to believe that the margin over base rate wouldn’t change.”