Bank Of Ireland UK Raising Tracker Mortgages

Usually when you take out a tracker mortgage it is set for life at a base rate plus a specific margin or differential.  In the  “good old days”  the banks here in Ireland were handing out trackers with rates as low as ECB rate plus 0.5% . People lucky enough to get one of those mortgages will be paying a rate of just 1.25% today.

Bank Of Ireland has a UK subsidiary which also dished out tracker mortgages  to thousands of UK  homeowners and buy to let investors . Now it seems that about 13,500 of these Bank of Ireland UK base rate trackers are going to have their rates increased.

The UK base rate is 0.5%  – and some of these these trackers were base rate plus 0.69% .  The margin on these is being increased to  3.99%  which will result in the mortgage rate jumping from 1.19% to 4.49% .
The rate increase will be applied in two stages for residential customers. The new differential from 1 May 2013 will be 2.49%, rising again to 3.99% on 1 October 2013.
For buy-to-let customers affected  the new differential will be 4.49% and will take effect from 1 May 2013.

The change does not affect all BOI UK tracker mortgages – only about 7% . Most of the  tracker mortgages affected were taken out before October 2004.

The mortgages affected apparently had  this wording in the terms and conditions which allows the bank to increase the tracker margin.

“Before the end of any protected period, we will only increase a positive differential or reduce a negative differential:

(i) if we believe that the increase or reduction is necessary to maintain the viability of our business following a serious adverse change in market conditions or in the relationship between the base rate and the rate which we pay on the funds we raise for use in our mortgage lending business;”

A report in the Irish Times in March quoted an  un-named BOI “source” as saying that tracker rates for Irish customers will not be going up.

(But we suggest that BOI tracker mortgage holders might want to dig out their original contract to check ?)

It’s interesting to see from BOI figures that their UK residential mortgages total €29 Billion – which is more than the total value of their Irish residential mortgages of €28 Billion (both figures include buy to let)

Bank of Ireland also hold  thousands of UK customer’s  deposits (including UK Post Office deposits) – worth about €29 billion – which is nearly as much as their Irish retail deposits of €35 Billion.

Bank Of Ireland is the only Irish bank still with a majority of private ownership. It was bailed out to the sum of about €1 Billion by the Irish taxpayer  – but some  wealthy private  investors have large sums of money riding on the BOI share price increasing.
Bank of Ireland was the only Irish bank to avoid State control after a consortium of investors bought 34.9 per cent of the bank’s shares  at 10c each in July 2011. The group was led by Toronto-based insurer Fairfax Financial Holdings and included Wilbur Ross , Fidelity Investments, Los Angeles-based Capital Group and Californian property firm Kennedy Wilson.