British lawmaker Andrew Tyrie has said Britain’s finance regulator must ensure customers are being treated fairly as a result of Bank of Ireland raising interest rates for some mortgages.
Mr Tyrie wrote to Martin Wheatley, the UK’s chief conduct regulator, asking for details on how the Financial Services Authority (FSA) is dealing with the increase, according to the correspondence which was made public by the lawmaker.
In Wheatley’s response, he said the mortgages covered by the change pre-date the FSA’s 2004 regulation of the so-called tracker mortgages, and that he didn’t believe the terms of the loans that track a government base rate were unfair.
The agency met with the bank before the change was announced to tell senior management it must ensure fair outcomes for customers, said Mr Wheatley.
“We need more information to be confident that the regulator has thought carefully about this issue,” Mr Tyrie, the chairman of parliament’s treasury select committee, said in a statement.
Mr Wheatley’s response to him “appears to fall short,” he said.
Bank of Ireland, seeking to return to profit after a government bailout, said it will increase interest costs for 7%, or 13,500, of its UK customers by widening the spread between its rates and the Bank of England base rate.
By Oct 1, the spread for some will widen to 3.99%, from 1%, the lender said on Feb 28. The increases won’t affect the bank’s UK post office customers, it said at the time.
Bank of Ireland said yesterday the change is the result of “the significant increase in the cost of funding these mortgages since 2008 and the need for banks to maintain greater levels of capital”.
It declined to comment on correspondence between the treasury select committee and FSA.
Ireland’s largest lender by assets, which is 15% state-owned, has been unprofitable on a pretax basis since 2009, following the collapse of the property market.
It stopped selling new UK mortgages in Jan 2009, except through its post office joint venture and Northern Ireland branches.
Irish banks — while prohibited contractually from increasing spreads on domestic mortgages that track the ECB benchmark rate — have been raising variable rates for the past two years to boost their lending margins.
© Irish Examiner Ltd. All rights reserved