The head of the National Landlords Association has hit out furiously at the Bank of Ireland’s decision to hike increase rates for some 13,500 mortgage borrowers.
Chief executive Richard Lambert warned that the rise could trigger repossessions, making tenants homeless.
Bank of Ireland customers – of whom buy-to-let customers will bear the immediate full brunt of the increases – have tracker mortgages and, on online forums, some say the rise will add as much as £500 to their monthly mortgage payments.
Most affected, however, will be those with several Bank of Ireland loans, where the cost of the mortgage payments could be higher than rental income – thus contravening the Bank’s own terms and conditions.
A buy-to-let mortgage holder who is currently paying 2.25%, made up of the Bank of England Base rate plus 1.75%, will see their rate climb to 4.99% from May 1.
Bank of Ireland says the average monthly increase will be £145 a month.
Residential mortgage customers will see their rates jump to 4.49%, but in two phases – on May 1 and October 1.
Lambert said: “The NLA is dismayed that any lender is prepared to introduce such a substantial hike in its tracker rate without considering the impact that it will have on borrowers’ ability to meet the cost.
“This represents a substantial increase in the payments landlords will have to make on a monthly basis and is likely to have an enormous impact on their businesses and the security of their tenants’ homes.
“At best, the provision of homes will become more expensive, at worst, this may lead to repossessions and homelessness.
“The Bank of Ireland appears to be cynically attempting to clear their buy-to-let mortgage book by forcing through unsustainable interest rate increases at a time when landlords and tenants are most stretched.”
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Comments
So Bank of Ireland want to shrink their exposure to UK property - these rates are intended to cause many of their borrowers to look to remortgage elsewhere. Thanks to the Funding for Lending Scheme, they'll find plenty of cheaper rates at the moment, so no problem (unless, shock, horror, house prices have gone down and not left them with enough equity). Interesting to note though that in this case, the net beneficary of the UK's Funding for Lending Scheme is an overseas bank...
I have a Bank of Ireland buy to let tracker mortgage but have not received such a letter.
I had always been prepared for interest rates to go back up so can afford this increase if it does affect me (which will more than double my mortgage).
However if/when interest rates go up then I would be snookered.
Amidst all the press coverage about this I read just one sentence in the Sunday Times which suggests it only applies to mortgage contracts taken out between 2004 and 2006. Does anyone know if this is right?
If so, its still bad news for those affected, deeply cynical, and quite possibly the thin end of the wedge, but right now its not quite the sweeping and draconian across the board increase that the headlines suggest.