Bank of Ireland rate rises: FCA won't take action

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.

Concerns over the move were raised by MP Andrew Tyrie, chairman of the Treasury Select Committee, to FCA chief executive Martin Wheatley in March (see the MP calls for FSA probe MSE News story).

But in a letter dated 20 May, but published by the committee today, Wheatley outlines reasons why the FCA won't take any further action on the issue. They include:

• As the issue relates to mortgages sold before 31 October 2004, FCA rules and principles can't be applied to these sales.

• Many of the affected mortgages are buy-to-let, which are unregulated products.

• It didn't believe the increase, or the way in which it was communicated, was unfair, as it only applied it to customers where it was clear in the offer document and contract that it could increase rates. The Bank of Ireland also gave customers advance notice and allowed affected borrowers to switch to another lender without imposing early repayment charges.

Wheatley also said the FCA isn't aware of any other mortgages containing a clause which allows the lender to do the same, and it doesn't believe the Bank of Ireland's decision will have a material impact on the rest of the industry.

The regulator adds that its "new style of supervision" means it will intervene earlier in a product's lifespan to prevent any harm to consumers.

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.

Wheatley also said in his letter that customers could take action against the bank if they can argue they were misled — for example, because of statements in marketing material, and that they suffered financial loss because of it.

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 borrowers 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.