7th August 2015
The Financial Ombudsman Service (FOS) has ruled in favour of buy-to-let owners who saw the interest on their tracker mortgage hiked by the Bank of Ireland.
In February 2013, the Bank of Ireland notified 13,500 customers that it would increase its differential on its base tracker mortgages, using a clause in the small print to do so.
One couple, Mr and Mrs J, complained to the FOS after they saw their interest rate move from 2.49% to 3.99%.
The couple had moved an existing £90,000 mortgage with the Bank of Ireland to a better deal in 2002, and the new interest rate would be capped until 2003.
However, in 2002 they borrowed an additional £275,000 that tracked the Bank of England base rate plus 1% (known as a differential). However, in 2013, the couple were told the rate had been increased from 2.49% to 3.99%.
Initially the FOS ruled that Bank of Ireland was within its rights to raise the differential but has now changed its mind.
Ombudsman Simon Pugh said: ‘The bank did not have the power, and it was not fair and reasonable for it to have done so.’
The bank has been told it must recalculate the loan ‘as if the increase had not happened’ by either refunding the overpayments or by reducing the capital balance of the loan.
Pugh accepted the bank was allowed to change the differential, as set out in the terms and conditions, but it could not prevent the couple moving the mortgage to a different lender, which they were unable to do without any exit charges within six months of the changes.