Bank of Ireland increase differential on tracker rates

Legal Action update:

We have received an initial draft (although not yet complete) of our Counsel’s opinion on the ability of the Bank of Ireland (BOI) to impose an increase in the differential on its lifetime tracker mortgages. The initial response from our barrister is very encouraging and he has provided us with a number of convincing arguments as to why BOI is legally not entitled to do what it has done.

This is very good news indeed for all those borrowers on lifetime tracker mortgages who are going to be affected by the increases which come into effect from next Wednesday (1st May).

The opinion was formed from a review of a number of sample documents which we provided to the barrister based on what we had collected from borrowers who had signed up with us and provided us with their documentation. We provided the barrister with complete sets of documents so he could see what a borrower would have typically seen from the start to the finish of the mortgage process. Whilst the opinion is not yet in its final form (we should have the final version on Monday) what has been stated so far supports our belief that the borrowers on lifetime tracker mortgages may have a right of action against BOI.

Once we have the final version of the opinion, we will be meeting with the barrister as soon as possible to discuss how we take this forward. The arguments are very complex and technical (the opinion so far stretches to 31 pages). One possibility may be to sue BOI for damages equivalent to the additional amount each borrower who instructs us will have to pay for the remaining term of the mortgage as a result of the increase in the differential.

In terms of what do you do next week when the increases come into effect, you could cancel your direct debits and set up a standing order for the amount you are currently paying – however you do risk being sued by the bank and a potential black mark against your credit rating if you do this, or alternatively you can allow the increased payment to go through but write to BOI and say you are making this payment without prejudice to a proposed claim for damages against them.

For those of you who have not signed up with us, I would urge you to do so. Please contact jemma@lawdepartment.co.uk and she will send you the necessary forms to complete and send back to us.

For those of you who have already signed up with us, we will be sending you a letter of authority to sign so we can obtain your file from the solicitors who acted for you on the grant of the mortgage as there may be relevant information in that file to support your case.

We would like to reiterate – the opinion is not yet in its final form so we will update you on Monday once we have received the final version.

We should also wait to hear about the outcome of the second letter that Andrew Tyrie sent to Martin Wheatley of the FSA on 21 March. In the first letter he gave a deadline to the FSA for responding, but not in his second letter. It appears the FSA are taking their time in replying. I am going to contact my MP again to get some news. However, I think it would be useful for the class action suit if we know the outcome of the second request for clarification sent by the treasury select committee. I think the press involvement is crucial as well to keep pressure up. I've written to the Ombudsman with a formal complaint and await acknowledgement.

thanks justin, when you say lifetime tracker do you also mean those deals that reverted to tracker after the initial fixed deal.

Paul anderton
You have raised a very good question there. I think ill wait for an answer to your question before I decide to sign up.

@Rita - when you say "we should wait", what exactly do you mean? Please remember, the changes take effect as of next Wednesday. Justin has provided sound legal advice here, ignore it at your own risk.

@Paul Anderton and Jackie - advice from Justin also applies to fixed and discounted rate products which reverted to trackers after the initial fixed/discounted rate term.

TO ALL - Justin has confirmed that enough affected borrowers have now signed up for him to be in a position to return the funds deposited by the Property118 GOOD Landlords Campaign in respect of underwriting the costs of the barristers opinion.

Thank you all and good luck, we are backing you all the way 🙂

We now have more money in the kitty to further enhance our mission to facilitate discussion and the sharing of best practice amongst landlords and letting agents.

@mark, all I was saying is that the reply from the FSA would give us further information relevant to the class action suit. I am not saying we cannot start, just that we should know all the relevant facts.

See article at http://news.rla.org.uk/bank-of-ireland-complain-if-youre-unhappy-about-tracker-rate-hike/

I have already posted a link to class action.

@Rita - It would be fantastic news if the FSA or the FOS were to rule against the Bank of Ireland but I don't think we can rely on that. Litigation is quite different and it may well take a judge to make a ruling on the complex legal arguments affecting this case. Given that barristers opinion is that affected borrowers have a strong case on numerous legal grounds to fight and that the damages which could be claimed, in one lump sum, are equal to the increases Bank of Ireland are seeking to impose as of next Wednesday (1st May) that is incredibly relevant. If the bank are ordered to pay such damages this will enable far more landlords to sell or refinance their properties. In some cases, where the outstanding mortgage is 15 years for example, the awards could be as much as 41.1% of the outstanding debt.

@Gary - thanks for the heads up on the RLA article. I have posted a comment there and a link back to this forum.

Wouldn't that be ironic if damages were awarded and then the borrower could pay down substantial BOI debt with BOI own money!!!
And still remain on a dirt cheap tracker with BOI not allowed to increase the differential.
That would stop all the other banks thinking of trying on their customers what BOI will have tried.
Hoisted by their own petards! springs to mind!!!

If only Paul, it's very difficult to envisage a scenario where they would pay damages and then reverse the deduction but granted, it's not impossible. I suspect most borrowers would sell or refinance when damages are paid out.