Around 1,200 Bank of Ireland mortgage customers with a base rate tracker will escape controversial rate hikes, it has been announced today.

Bank of Ireland first announced in February it would up rates for 13,500 base rate tracker mortgage customers, even though the 0.5% base rate hasn't changed since March 2009 (see our Remortgage Guide and Cheap Mortgage Finding guide for switching tips).

The bank claims its terms and conditions allow it to increase the differential between the base rate and the rate it charges homeowners on some tracker mortgages.

Residential customers were moved to a differential of 2.49% on 1 May, meaning they pay a 2.99% rate (0.5% + 2.49%). This will rise again to a 4.49% rate (0.5% + 3.99%) on 1 October.

Meanwhile, buy-to-let customers saw rates rocket to 4.99% (0.5% + 4.49%) on 1 May. While all rates are now uniform, they previously varied per customer.

U-turn

But Bank of Ireland has today performed a U-turn, saying around 1,200 customers will no longer have their mortgage rate hiked.

The following customers are exempt from the rate hikes:

  • 1,000 flexible mortgage customers who were actively using the flexible facilities on their mortgage account – which enables users to overpay and borrow more. These customers received a letter from the Bank of Ireland before the rate hikes were announced, which said the differential was for the life of the loan from the date the letter was sent.  

  • Around 200 Bristol & West customers whose mortgage began before July 1995 and who switched to a Bank of Ireland base rate tracker product between 2001 and 2004. These customers received documentation detailing that the differential on their mortgage was variable, but the mortgage conditions they received on taking out the new mortgage didn't include the circumstances under which the differential could change.

Flexible mortgage customers had their rates hiked on 1 May, but Bank of Ireland says it will automatically refund any overpayments and rates have fallen to whatever they previously were.

The second group of around 200 customers were notified they'd be exempt from rate hikes before the increases took effect on 1 May – so their rate never went up.

All affected customers have been written to about this change.

Fight back

Bank of Ireland has said anyone hit is free to move mortgage without incurring any early repayment charges. However, tightened mortgage criteria and falling house prices in some areas mean not everyone will qualify for a new home loan.

Prominent consumer lawyer Mike Dailly, of Glasgow's Govan Law Centre, urged customers to fight back in a guest comment for MoneySavingExpert.com (see the 'Fight Bank of Ireland's unfair mortgage hike' MSE News story).

He said the bank "has failed to give its customers evidence of any exceptional circumstances" which would justify the rise.

Customers have a right to complain to the Bank of Ireland, and if they remain unsatisfied after eight weeks, they can go to the Financial Ombudsman Service (see our Financial Rights guide for how to fight back).

However, only some with a buy-to-let mortgage can complain to the Ombudsman.

This is because buy-to-let mortgages aren't regulated, meaning the Ombudsman can't look into complaints about them, except in certain circumstances, where for example, advice was given. If you're unsure, take your complaint to the Ombudsman anyway.