Financial Conduct Authority chief executive designate Martin Wheatley says the regulator does not have “any concerns” about the Bank of Ireland’s rate hike on its tracker mortgages.
In February, the Bank of Ireland revealed it is more than doubling the rate for 13,500 borrowers on its tracker mortgages, some 7 per cent of its borrowers.
Around half of those affected are buy-to-let borrowers who will see rates increase from 1.75 per cent above base rate to 4.49 per cent above base on 1 May. Residential borrowers will see their rates rise in two stages, firstly to 2.49 per cent on 1 May and then to 3.99 per cent on 1 October.
The bank blames the rise on increasing capital requirements.
On 8 March, Treasury select committe chair Andrew Tyrie wrote to Wheatley expressing concern at the move and asking if it amounts to misselling or unfair contract terms and what action the FSA is taking.
In his response, dated 12 March but only published today, Wheatley says the sale of these mortgages are outside of his remit as they were completed before 2004 regulations. But he says he was pre-warned about the move and spoke to senior Bank of Ireland managers.
He says: “We currently have no plans to treat this as a prima facie case of misselling. We have reviewed the terms and conditions provided to us by the Bank of Ireland UK and did not identify any concerns which led us to believe the terms may be unfair.”
He adds: “However, only a court may determine whether a term is unfair under the regulations. If a customer is eligible and complains to the Financial Ombudsman Service, it may come to its own view about what may be fair and reasonable.”
On 21 March, Tyrie wrote again to Wheatley accusing him of not addressing the main issues and demanding further answers.
He wrote: “Your response does not tell the committee whether you were concerned at the action of the Bank of Ireland, what assessment you have made of the impact of its decision on the rest of the industry, nor how the FCA would act in the event of lenders taking this sort of action on the future.”
Tyrie wants to know whether customers were clearly aware of the possibility of a rate hike when sold the deal and which other lenders have approached the FCA with planned rate hikes
Wheatley says Bank of Ireland analysis shows 94 per cent of the affected mortgages are below 75 per cent loan-to-value and are approximately 10 years old.
Bank of Ireland customers can remortgage without early repayment charges, including any charges connected to extra borrowing. It is also considering measures to help borrowers already in arrears.