A broker has warned borrowers accepting an offer from Bank of Ireland to switch away from their fixed rate mortgage early could pay hundreds of thousands of pounds in additional interest payments.
Bank of Ireland is offering borrowers the option of ending their fixed-rate deal to transfer to an Aldermore mortgage with a discounted initial rate.
The Aldermore fixed rate is cheaper but the broker, who does not want to be named, warns that after the fixed rate expires borrowers would pay more than double to rate they would get if they stay with BoI.
The broker, says one of his clients has four buy-to-let fixed rate mortgages with BoI of 5.79 per cent or higher. BoI said he has until 17 December 2012 to apply for to receive a three-year fixed rate from Aldermore of 3.49 per cent. This rate is only available for 36 months before it reverts to Aldermore’s SVR of 5.73 per cent.
If the client remains with BoI, all the loans will revert to a rate of 2.25 per cent, or 1.75 per cent above the Bank of England base rate, within the next six months.
The broker says if his client accepted the deal he would face additional payments of between £170,000 and £235,000 for each mortgage over the remaining 20 years of their terms, or £812,000 in total.
The broker says: “I cannot think of a scenario where the client would benefit by taking up this deal.”
The deals are only available through London and Country, which says all BoI customers will be offered advice.
London and Country head of communications David Hollingworth says: “From our point of view a BOI borrower coming to us would be advised in exactly the same way as any other client.”
A Bank of Ireland spokeswoman says borrowers are under no obligation to accept the offer.
She says: “We are offering this product to customers who have locked-in rates up to 2015 and are offering an early repayment charge waiver as part of the promotion. We review all of our offers to ensure they offer good value and accept they will not be suitable for everyone; this is mitigated by all enquiries being put through an advised sale via L&C.”