Bank of Ireland increase differential on tracker rates
The story of the Bank of Ireland decision to increase to the differential (interest rate margin) on tracker mortgages started on this forum when a professional landlord contacted Property118 within minutes of a letter from Bank of Ireland landing on his door mat. What ensued was outrage from landlords and affected residential mortgage borrowers. The story was quickly picked up by the National Media as it wasn’t just the 13,500 affected borrowers who were worried.
Will this set a precedent for other mortgage lenders to follow?
Property118 reacted by using funds donated to The GOOD Landlords Campaign to underwrite the cost of a barristers opinion on the legality of the Bank of Ireland’s actions. The remainder of this thread,one of the most read and most commented threads of all time on Property118, continues to tell the story as it unfolds.
If you want to skip the story and cut to the chase simply CLICK HERE
Of the 13,500 affected borrowers, 1,200 have had the decision reversed by Bank of Ireland. With additional support and pressure we believe all affected borrowers can and will see justice done.
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Lee, a professional Landlord asks, “help! I have just received a letter from the Bank of Ireland stating they want to increase the differential on my tracker rates.
I have 12 mortgages with the Bank of Ireland previously Bristol and West. I have been on a base rate tracker of 1.75% above base, but now Bank of Ireland are using some fine print claiming they have to recapitalise and saying the ‘new differential will be 4.49%.
How can I fight back?”
The original policy wording seems to be:
6 INTEREST
Charging interest at a tracker rate
(j) Unless we change the differential (if any) under condition 6 (n), we will not change the tracker rate unless the base rate changes.
(m) in condition 6 (n):
– a “positive differential” means a percentage which we add to the base rate to arrive at the tracker rate; and a “negative differential” means a percentage which we subtract from the base rate to arrive at the tracker rate.
(n) We may reduce a positive differential or increase a negative differential at our discretion by giving you not less than seven days written notice. This means that we can change the differential in a way that is favourable to you.
The above seems to indicate that they can reduce the rate in my favour, but not give them the right to increase it. Am I correct?
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Member Since June 2013 - Comments: 1121
3:34 PM, 12th February 2014, About 12 years ago
I think Colin Childs explained this earlier in the forum. Something to do with what they are paying on money borrowed at a certain point in time, and what they are paying now etc. When we took out our mortgages the money was more expensive. Now its cheap because interest rates are low and we need to dig ourselves out of this hole.
So why cannot they borrow the money now, pay off their expensive loans, then lend it to us at 2.98%. Or do they have an early repayment charge for the life of the mortgage?
Member Since September 2013 - Comments: 232
3:49 PM, 12th February 2014, About 12 years ago
Reply to the comment left by “Gary Nock” at “12/02/2014 – 15:34“:
Or even better honour their 1.75 contracts with us, if they can find so much money to invest in the Post Office, but I do agree with your point Gary although 2.98 is more than we should have to pay
Member Since June 2013 - Comments: 1121
4:08 PM, 12th February 2014, About 12 years ago
LS I would take 2.98 rather than 4.99 but like you I preferred my 2.25% before they hiked it up.
If it all goes to plan then they might be paying us!
Member Since August 2013 - Comments: 126
6:43 PM, 12th February 2014, About 12 years ago
Reply to the comment left by “ian ” at “12/02/2014 – 14:32“:
The Post Office has it’s own funding sources , as is a bank in it’s own right.
As the operation is a joint venture. BOI will be providing the technical expertise and the Post Office the finance. All part of BOI’s plan to exit the UK banking market.
The end game in my opinion will see the joint venture administer the run down of the old BOI mortgage book, while growing the new business on the other hand. As ties into the JV lasting until well into the 2020’s.
Member Since October 2013 - Comments: 35
7:24 AM, 13th February 2014, About 12 years ago
Reply to Colin 12/2/14-18.43
My understanding is that Post Office is not a bank in its own right, , Bank of Ireland has the banking licence & the infrastructure, PO contributes its brand & its distribution network.
The current JV grew out of banking arrangements put in in place between PO & BOI in Northern Ireland in the early 1990’s. Started with the First Rate /Foreign Currency business around the NI /ROI border dealing with Irish Punt then Euro / £ Stg business.
Impetus then was for BOI to develop a ‘cheap’ route into the UK mass market & for PO to develop additional revenue streams as the rest of its counters business came under threat from EU driven changes to public procurement which forced Govt to tender various services & as also Govt sought to move benefit payments away from cash over the PO counter to direct payment via bank accounts etc.
PO was between a rock & a hard place then, still is & must be thinking very hard about its future as the public face of BOI in the GB marketplace!.
.
Member Since September 2013 - Comments: 232
8:47 AM, 13th February 2014, About 12 years ago
Reply to the comment left by “GHH 64” at “13/02/2014 – 07:24“:
This seems to be a complex issue but I totally agree with your last paragraph GHH
Member Since September 2013 - Comments: 232
8:52 AM, 13th February 2014, About 12 years ago
Reply to the comment left by “Colin Childs” at “12/02/2014 – 18:43“:
I wonder why the Mortgage Strategy articles states that “the mortgages will be funded by the Bank of Ireland” is this an error. 2.5 billion for mortgages is a lot of money
Member Since July 2013 - Comments: 264
9:07 AM, 13th February 2014, About 12 years ago
Reply to the comment left by “Colin Childs” at “12/02/2014 – 18:43“:
So when I read BoI Funding I need to read Funding as Advice, Tracker as SVR & 1.75% as 4.49%. No wonder why we need a QC.
Ahh the penny has dropped your making a joke BoI Advice.( Money Talks ).
Member Since January 2011 - Comments: 12193 - Articles: 1396
9:57 AM, 13th February 2014, About 12 years ago
ACTION PLAN
Please see my latest article here >>> https://www.property118.com/tracker-rate-campaign-needs-more-landlord-association-support/63679/
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Member Since August 2013 - Comments: 126
10:51 PM, 13th February 2014, About 12 years ago
Reply to the comment left by “GHH 64” at “13/02/2014 – 07:24“:
My reference to being a bank was in the context of the financial services it offers, i.e. savings accounts. Which results in the JV operation having access to retail deposits. I appreciate the history. The landscape has somewhat changed after the events of 2007/08 and will continue to do so for years to come.