2 April 2013

FSA don’t see anything wrong with Bank of Ireland Tracker Mortgage increase

The FSA appeared unwilling to challenge the BoI rate rise but after a public dressing down, the FCA might be looking at the problem a bit more seriously.

The war of words continues, but there's little sign of any help for Bank of Ireland borrowers with Tracker Mortgages affected by the sharp rate rises announced by the Bank of Ireland reported earlier in March.

The Tracker Mortgages will still track the Bank of England Base Rate, but the differential between the base rate and the rate charged to customers will be increased from 0.89% to 3.99% by October. The differential increase was justified under an exceptional circumstances clause on the basis that the bank now has to hold more capital and that the cost of borrowing to fund the mortgages had risen.

Andrew Tyrie MP, Treasury Committee Chairman wrote to Martin Wheatley, ex-FSA now FCA Managing Director asking what action the FSA had and were taking. We can now see Martin Wheatley's response to Andrew's questions.

As expected, Mr Wheatley pointed out that the mortgage contracts were written before the FSA regulated mortgage activity and Buy-to-let mortgages were not covered in any case.

On whether the contracts were unfair, Mr Wheatley said: "We did not identify any concerns with the relevant terms which let us to believe that the terms may be unfair. 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 (FOS), it may come to its own view about what may be fair and reasonable in the circumstances of any particular case.”

Asked Will you treat this as a prima facie case of product mis-selling?, Mr Wheatley responded: "We currently have no plans to treat this as a prima facie case of mis-selling.”

Andrew Tyrie was clearly not happy with the response received from Martin Wheatley and wrote again on 21st March, saying:

"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 might be on the rest of the industry, nor how the FCA would act in the event of lenders taking this sort of action in the future.”

He went on to ask further questions and requested "a much more substantive reply.” Andrew Tyrie commented:

"We need more information to be confident that the regulator has thought carefully about this issue. It must exercise judgement to ensure that customers are being treated fairly. Mr Wheatley's letter appears to fall short on both counts.”

The message does seem to have hit home as Martin Wheatley has since made a speech saying the regulator was particularly worried about potential abuses of customers trapped in mortgage deals saying:

"One of our concerns is abuse of the back book if I can call it that, so where you have got locked or trapped customers, that fees are being raised in inappropriate ways”

You can always stay with an uncompetitive mortgage and in the case of the Bank of Ireland complain to the Financial Ombudsman and hope to win. Alternatively, you can vote with your feet and let MoneyMaxim help you remortgage.