A leading MP has urged the regulator to investigate whether Bank of Ireland is guilty of mis-selling after it announced plans to hike 13,500 customers' base rate tracker mortgages, even though the base rate hasn't moved for four years.
Andrew Tyrie, chairman of the Treasury Select Committee, says he is "very concerned" by this action. He has written to Financial Services Authority managing director Martin Wheatley asking him to investigate.
Some Bank of Ireland customers will see a potentially crippling £6,400-a-year jump in their costs. One of our users told us his rate is soaring from 0.89% to 4.49% on 1 May, taking monthly payments from £243 to £780 (see our Financial Rights guide for how to fight back).
Base rate trackers are supposed to track the base rate, hence the name, and only move up and down if that key financial indicator changes (see our free Remortgage guide). The base rate has been 0.5% since March 2009.
In the letter, Tyrie says: "I am very concerned at press reports about recent action taken by the Bank of Ireland. It has apparently told UK customers with tracker mortgages that in the coming months it will be substantially raising the interest rates it charges them.
"This is in spite of the fact that the Bank of England base rate remains unchanged."
When asked about Bank of Ireland's decision in an interview with MoneySavingExpert.com to be published soon (get our weekly email to see it), Wheatley wouldn't talk specifically on the Bank of Ireland, but answered on mortgages in general.
He said: "I think banks have got to be much clearer about what the contract is that they're expecting people to sign up to.
"Most of these [tracker] mortgages, not all, but most of them do allow the banks to vary the rate and not just in relation to a base rate change.
"Clearly when we see what could be abusive behaviour we'll talk to the banks."
The bank insists a clause in contracts allows it to raise rates. It said it did so because of the "significant increase in the cost of funding".
Questions to answer
In his letter to Wheatley, which was sent on Wednesday but only made public today, Tyrie asks the FSA to answer questions including:
- Will you treat this as product mis-selling?
- Will you be investigating whether the mortgage agreements concerned contained unfair clauses?
- What analysis have you made of affected customers and their ability to move their mortgage to another provider?
- How many other mortgage providers have similar clauses in their contracts?
- What discussions have you had with other lenders as a result of the Bank of Ireland decision?
Tyrie says he wants a reply by Monday and that once he gets a response, he will also make it public.
Last year, Manchester Building Society upped tracker rates for many customers who took out mortgages in 2004 or earlier. Some of its borrowers now pay 4.74% instead of their previous 0.99% rate.