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Bank or Ireland - Increase of "differential" !

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smiffy
smiffy Posts: 173 Forumite
Part of the Furniture 100 Posts Combo Breaker
edited 28 February 2013 at 1:33PM in Mortgages & endowments
Back in 2004 I took out a Bristol & West Base Rate tracker mortgage at .89% over the Bank of England Base Rate. In 2004 .89% was a high rate as I was self employed and had to pay a premium rate.

The deal was that that rate was for the life in the product, in my case 23yrs.

Today the Bank or Ireland letter, states that there are "Special Conditions" in the T&Cs which allow them to increase the rate. Firstly in May 2013 2.49% and then again on October 2013 to 3.99%

This will change increase my payment by over £500 a month.

Who else is in this situation?

I'm in shock at this as I've only expect my payments to creep up with the base rate over a period of time.

How can they get away with this?

I've got all my paperwork from 2004, but don't have any info on the "Special Conditions" 6(s), 6(l), 6(m) or 6(p).

Can some one advise what is in section six please.

Not sure what to do now!
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  • Check my thread, I've posted a similar thing this afternoon and have a few responses. Seems like a lot of people received letters this morning. I'm going to fight it as my mortgage is a 'tracker'.
  • I've also received a letter from them.

    I thought my rate was set at 1% above base rate for the life of the mortgage.
    Yes it is a terrific rate and I really did think it was for life.

    I have requested that they send me the original terms of the mortgage.

    Once I receive these I will look further into it.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    smiffy wrote: »
    I've got all my paperwork from 2004, but don't have any info on the "Special Conditions" 6(s), 6(l), 6(m) or 6(p).


    Find the original contract documentation that was sent, i.e. the small print. Which details the terms and conditions pertaining to your mortgage.
  • saxmanjc
    saxmanjc Posts: 111 Forumite
    Ninth Anniversary 10 Posts Combo Breaker
    edited 28 February 2013 at 6:29PM
    Same situation here. Original mortgage with Bristol & West.
    I'm worrying that the original mortgage agreement paperwork is effectively useless now. When mortgage business is handed over from one lender to another as happened here the new lender honours the original rate so as not to lose the business. However, each time the mortgage is passed on to a new lender there is a new agreement in place. So I think the fact that there is no "special circumstances" clause 6 in our original Bristol & West paperwork is a moot point.
    I am not a legal or financial specialist and hope I am wrong but I do fear that Bank of Ireland may have engineered themselves a legal right to do this. :(
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  • smiffy
    smiffy Posts: 173 Forumite
    Part of the Furniture 100 Posts Combo Breaker
    Thrugelmir wrote: »
    Find the original contract documentation that was sent, i.e. the small print. Which details the terms and conditions pertaining to your mortgage.

    I have all my original 2004 paperwork, including the fridge contact number sticker. What I don't have is the special Terms paperwork which is a bit surprising.

    I'll be looking to challenge this.
  • Like others I signed up for a 20 year mortgage with Bristol & West in 2000 at 1.35% over base for life. There were cheaper products on the market at the time but I like to think I was wise enough to see that rates were likely to only go one way at the time and I paid a significant 'arrangement' fee to secure this mortgage.

    My letter received today states the differential is changing to 4.49% on May 1st! That's a 332% increase, they also say that if I want to cancel my agreement I'll have to pay the closure fees! The arrogance is simply breathtaking.

    My B&W agreement has a single clause 11.1.4 which I believe is what BOI are hanging their hat on:

    11. Changes to this agreement
    11.1 We can make changes to this agreement if we believe it reasonable to do so for one or more of the following reasons:
    11.1.1 To reflect any future changes that we make to the flex terms and conditions that we offer to new borrowers;
    11.1.2 To reflect changes in technology
    11.1.3 To reflect changes in the way we look after your mortgage account;
    11.1.4 To reflect a decision or recommendation made by, or a requirement of, a court, ombudsman or one of our regulators.

    BOI are in effect saying that the requirement to hold more capital reserves is a legitimate reason to change the agreement. I find this peverse, the past actions of the financial services industry collectively is the reason they are required to hold more capital reserves so in effect they are attempting to penalise their own customers for their own mistakes.I could go on but you'll understand the logic of the arguement.

    I intend to formally complain and when the normal bank type response arrives I will complain to the Financial Ombudsman as there is a very important principle at stake here. I would advise you all to do likewise and I'm hoping that Martin can get involved with giving BOI as much bad publicity as possible as their ethics are reprehensible.

    Anybody out there a financial legal expert and is there any successful precedent either way on this issue? Class action anyone?
  • I found the original T&C from Bristol & West and this what they say:

    (c) Unless we change the Differential under Condition 4(h), we will not change the Interest Rate unless the Base Rate changes.

    (h) We may change the Differential at any time by giving you not less than thirty days written notice before the change takes effect. Conditions 4(i) 4 (j) apply to any change in the Differential which we make under this Condition 4(h)

    (i) Before the end of the Guarantee period, we will only increase the Differential if we believe that the increase or reduction is necessary to maintain the viability of our business following a serious adverse change in market conditions or in the relationship between the Bank of England Base Rate and the rate which we pay on the funds we raise for use in our mortgage lending business:

    (j) After any Guarantee period, we may increase the Differential for one or more of the reasons specified in Condition 4(l)

    The reasons mentioned in Condition 4(j) are as follows:

    - because interest rates generally are rising;
    - because we need to increase the rate we pay to depositors in order to attract or retain their money;
    - because we want to respond to the actions of our competitors;
    - because we need to increase the amount we receive from borrowers in order to maintain a prudent level of profitability or reserves;
    - because it is costing us more to administer borrowers accounts;
    - because we believe the general economic factors have increased the risk of shortfalls on borrowers accounts, or on accounts of the same type as yours and we need to increase the amount received to protect us against that risk:
    - because we wish to retain existing borrowers or attract new borrowers;
    - because of any change in taxation which affects our profit from our ordinary activities;
    - because we need to reflect the change in the law, or in any code of practice which applies to us, or a decision or recommendation by a court, ombudsman or regulator.

    Any comments anyone?

    I will be happy to work with the rest of you to add weight to our individual actions.
  • Like the rest in this thread i was astounded to receive a letter from the Bank of Ireland informing me my rate was going up from 2.25% to 4.99%. This will effectively double my payments, what is even more worrying is that I have two other buy to let mortgages with them and if these double then I will be put under severe financial strain.

    i agree with all the above comments and would like to ask even if they can increase the Base Rate Tracker Differential how do they reach a figure of a 2.74% increase, it seems arbitrary and presumably gives them free reign to raise it again as and when they feel.
  • Just received my bombshell letter from Bank of Ireland also..... mine was A Bristol & West repayment Buy to let base rate tracker mortgage in Jan 2004 1.75% plus the base rate

    Current rate is 1.75% +0.50%(base rate) = 2.25%
    Rate from 1st May 4.49% +0.50%(base rate)= 4.99%

    my special conditions state..... unless we change the differential under 6 (m) of our Residential Mortgage Conditions we will only change the tracker rate if the base rate changes.

    I can't find what out 6 (m) is ? should this apply as my mortgage is Buy to let ?

    Seems like legal robbery!! all advice would be so grateful.
  • I have a B&W tracker mortgage from 2002 for the entire mortgage period of 1% above the base rate and have too received the same letter today.
    In my terms and conditions ('Residential Mortgage Conditions 2001') clause 6m states "We may change the differential with 30 days notice ... and terms 6o to 6r apply......"
    Terms 6o to 6r cover it being necessary to protect their business; the regulator making them change the differential (which isn't happening); or a change in the relationship between the base rate and the rate which they pay on their funds used in mortgage lending (which is possible). Outside the end of a 'protected period' they can do whatever they like.
    My understanding of our protected period is for the life of the product as it uses the term "For the entire mortgage period at fixed differential......except under condition 6m".
    I will be challenging this too but have a horrible feeling they've carefully done their legal homework.
    However, my gut feeling is that if I had savings with this lot I'd be withdrawing the lot.
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