Monday, 11 March 2013

My views on the Bank of Ireland tracker changes

Over the weekend, I have been contacted by numerous business associates and friends over the Bank of Ireland changes. Here is a press release being sent to the media by my team this morning - 

One of the UK’s largest private sector landlords has welcomed the growing clamour for financial regulators to investigate the Bank of Ireland’s plan to raise customers’ mortgage tracker rates.
“This is the sort of activity which really gives banks a bad name,” said multi-millionaire and social entrepreneur Kevin Green.
Green runs a massive portfolio of private rentals properties from his South Wales base and sources investment funds from a wide variety of locations.
“In these austere times, and with all that has happened in the banking world, you would think that the banks would be keener than ever to demonstrate that they are operating on a fair and level playing field,” said 49-year-old Green.
“Sadly, the Bank of Ireland have demonstrated the sort of underhanded tactics which gives banks a bad name. It is time that borrowers and the public at large said ‘enough is enough’ we will tolerate no more of this activity.”
The chairman of the Parliamentary Treasury has written to financial regulators asking them to investigate.
In a letter to the Financial Services Authority, Andrew Tyrie said he was “very concerned” and asks if it was a case of product mis-selling.
Despite the Bank of England base rate remaining at 0.5%, Bank of Ireland is more than doubling its tracker rate. The Bank of Ireland, which owns Bristol and West, has, so far, offered no comment on the move. About 13,500 mortgage borrowers with Bank of Ireland and Bristol and West will see the cost of their home loans rise.
It has the power to change the interest on these home loans, even if the Bank rate does not move. But mortgage brokers have criticised the move.
The Bank of Ireland has blamed the rising cost of providing these mortgages and new rules on the amount of capital it must hold in reserve. Banks must hold a higher buffer of capital to a certain level in order to keep to European rules.
From 1 May, the bank will raise the mortgage rate for residential customers from, typically, the Bank of England rate plus 1.75%, to the Bank rate plus 2.49%. It will then raise it further, to Bank rate plus 3.99%, on 1 October. Buy-to-let customers will see their rate increased to Bank rate plus 4.49% on 1 May.
Mr Green said: “This alarming and cavalier move by the Bank of Ireland has a direct impact of two of my contracts.
“As far as I am concerned (and believe you me, as a seasoned landlord and property investor I have plenty of experience of these matters), the ‘differential’ clause being invoked by the Bank of Ireland was unclear to me as a customer when I took out buy to let mortgages with them.
“Under Financial Services Authority (FSA) guidelines, this may be deemed to be outside of the rules of lending as the FSA quite clearly states that customers must be made aware of all clauses in a mortgage offer, with a clear explanation.
“This sort of tactic by the Bank of Ireland will quite clearly spill over to tar all banks with the same brush. We should all be interested in making sure they are not allowed to get away with these underhand tactics. The regulators really need to haul Bank of Ireland in over this one.”
Last week, Andrew Montlake, of mortgage broker 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,” he said. Mr Green added: “Over the weekend, the social networks on the internet have been red hot with complaints about the conduct of Bank of Ireland. Protests are gathering and people are, quite rightly, furious with the bank’s behaviour.”