Bank of Ireland tracker mortgage % increase

Denise2007

VT82 wrote: »

This so called expert can waffle on about Basel being relaxed and not coming into effect until 2019, and about cost of funding coming down, but unless he can get in there and see BoI's balance sheet, he's just talking out of his ar5e to try and sound clever.

Although UK savings rates have been tumbling, BoI's marginal cost of funding will have shot up over the last 4 years. It was once an A+ rated institution, residing in a AAA rated sovereign, benefitting from cheap wholesale funding. It is now well and truly rated junk status. It will have access to minimal wholesale funding, and the only retail savings left in there will be having to pay a good whack to keep it there.

If BoI suffers loss after loss after loss, while arrears are going up and up and up, it's capital adequacy will also be depleted to the point at which it's not a going concern. Basel being relaxed or delayed won't change this. They don't wait until it runs out of money - if it's not a going concern, it gets 'resolved'.

It's too big to fail, but Ireland's government is not strong enough to step in and support it, so a failure would be catastrophic. The FSA will probably be nudged by the UK government to let this rate change happen, just so they don't have to step in like they did with Iceland to bail out any savers caught up in it.

I'm not arguing whether or not their proposed rate change is fair or not, just saying that this expert should stick to the legal aspect, and leave the finance to the professionals.

I completely agree with the above, Irish government will not step in to rescue the bank. Also, cost of funding is coming down but given the rating for BOI doubt it is cheap for them to borrow.

Denise2007

pandersturn wrote: »

a class action is being organised via property 118.

Am watching this thread too at property 118. They are still trying to determine if there are grounds to launch a class action, this has not been done. The solicitor has advised given the terms in the contract that success would be limited and a barrister is currently reviewing. The legal experts have not yet advised if there are grounds for a class action. I think they are waiting to see the response from the FSA. If that is not favourable doubt this will proceed. Although there is chat of suing brokers and solicitors as the clause was not highlighted when taking out the mortgage ... Again barrister reviewing.

I may be wrong but sounds like straws are being clutched ....

JimmyTheWig

swardean wrote: »

I have a Residential tracker mortgage (0.65 over base rate). I was massively concerned as this would really put me on the brink.

Rang the bank this morning and they said, "It doesn't apply to you you do not have the clause in your contract that allows us to do this."

Whilst I am relieved, I would still like to help anyone affected

Glad for you that you aren't affected.
Good to hear that you still want to help others.
But at the same time, can I suggest that you use this as a wake-up call? Even though they have confirmed that they won't be putting up your differential, you are still on a variable rate - a very low variable rate at that.
Interest rates are bound to go up at some point. At which time your rate will go up.
You need to be prepared for this.
If I were you I would work out what you would be paying on your mortgage if rates went up by, say, 1%. Put the difference between this and what you are paying into a savings account each month. That means (a) if rates go up by 1% then you will know that you can afford it and (b) if rates go up further than this then you will have a safety cushion of savings to help you out at least in the short term.

swardean

Sound advice Jimmy, thanks.

Also, can the posters saying "Interest rates are lower than when you took out the mortgage and you can't expect to pay interest rates of £2.25%", please do one.

These are not relevant to the debate and no help to people who may face genuine hardship through this.

I took mu mortgage with base rate about 5% (+plus my 0.65 tracker). So paying 5.65% in total. At the time I could afford this, but since the financial crisis has cost me a pay freeze for nearly 7 years despite the huge inflation. A creep back 5% base rate would be tough for me but just about manageable. However, they are looking to add a differential of 4%!!! so if interest rates rose to 5%, I would be then be paying 9% compared to 5.65% at the start of the arrangement. How can that be fair.

Beej_1973

jamesd wrote: »

That opinion piece appears to summarise a key issue very well:

"We will only increase the differential under this paragraph if we believe the increase is necessary to maintain the viability of our business"

"BoI explains its UK mortgage business is strong and not in any financial difficulty"

So BoI is at one point claiming that it is at new risk of insolvency - a non-viable business - and at another claiming that it is not.

BoI does have alternative approaches available. It can do as some other lenders have done and offer financial incentives to those with unprofitable or undesirably risky mortgages to leave, instead of using a punitive interest rate. That would be expected to cause those who can leave economically to do so, leaving those who have some disadvantaged position remaining and protected by the FSA rules about mortgage prisoners.

Thrugelmir, the plain language of the contract is about viability of the business and that implies a clear, imminent and provable risk to solvency that can only be addressed by making a major change to the product terms. Merely being unprofitable for some loans isn't a failure of viability for a business. So I wonder how many more months the bank can surrvive without becoming insolvent if this change is not made. A consumer lawyer's opinion is perhaps more than simply personal opinion.

Dont rise to Thrugelmir, he hasnt a clue, hasnt seen the contract, and just wants to wind people up........looking at how many posts he has made, he has clearly nothing better to do

jamesd

I have seen at least one set of terms that would let BoI increase the rates for the people who have that particular set of terms, those applied to some Bristol and West mortgages.

It's also interesting to read that some BTL landlords had a clause referencing the residential mortgage terms but weren't supplied with those terms because the mortgage wasn't residential. Going to be interesting to see whether the bank can enforce terms it never even supplied to a customer.

Beej_1973

Thrugelmir wrote: »

Article appears to be more of a personal opinion on bank lending than a legal opinion on the contractual issues that lie at the heart of the matter.

.....and all of your post are also personal opinion..... even if it is a bitter and twisted one

Denise2007

jamesd wrote: »

The trouble with that argument is, this is both a legal and regulatory discussion as well as a financial one. It's about contract terms, when they can be invoked and whether the current situation qualifies. It seems likely that given the apparent high chance of legal action, BoI is going to have to prove in court that its situation today is sufficient to trigger that clause. All of that sort of thing is a matter for lawyers and regulators as well as accountants and bankers.

The cost of funding part of the clause is easy: "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 in our mortgage lending business". I expect that BoI might well be able to prove those parts. That leaves the additional viability portion to satisfy.

It's really hard to see how BoI can both claim that it is in no financial difficulty and that it is in sufficient financial difficulty that it has to invoke a viability-triggered exceptional conditions clause. One of those claims has to be untrue. Either it's viable and can't invoke the clause or it's not and can.

My opinion is that the no financial difficulty claim is untrue. If so, then it may well get to invoke that clause successfully, after proving it in court.

I agree about the longer term going concern issue. But the first stop there is raising the rates for the mortgage contracts that allow it without having to prove a threat to viability. The ones with the viability clause have a higher barrier that provides greater protection to the borrowers.

I agree with your post, I think BOI are having difficulty and will have no problem proving this in court. The solicitor who reviewed the contract terms in property 118 advised they could satisfy all points.

They've reported a 2bn loss for 2012 and looking to make redundancies per the irish independent today.

Denise2007

Beej_1973 wrote: »

.....and all of your post are also personal opinion..... even if it is a bitter and twisted one

That's not very nice. Everyone is entitled to their opinion.

I've worked in financial services for several years although not bank of Ireland but many of the large UK banks and a lot of what he says is true in my opinion.

TTRTR_2

I've been in a legal case fighting my fathers house willed to a nurse known to the family on his deathbed.

It's been running 3.5 yrs now, half the estate is gone in fees, we've barely had a day in court and although we're near to settled, each and every decision seems to prompt more fees and delay.

With this in mind if my own mortgages were affected by something like this, I'd probably want to move on to another lender or even sell up to avoid the lawyers.

As a long term landlord I find it hard to believe anything bought in the early 2000's couldn't be mortgages for under 60% LTV today, which is where the bet rates are.

Only this morning I got an Emily from a broker mentioning a 60% LTV btl loan at under 3% apr.