Bank of Ireland increases mortgage rates by 50%
Filed under: Mortgages
The bank is set to increase its standard variable rate (SVR) from 2.99 per cent to 4.49 per cent by September this year.
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Those with Bristol & West and Bank of Ireland branded mortgages will face the rate increase, while Post Office customers, whose mortgages are also provided by Bank of Ireland, won't be affected by the change.
The increase will arrive in two stages. In June the rate will rise from 2.99 per cent to 3.99 per cent, and then the further increase to 4.49 per cent will happen in September.
Why are rates rising?Bank of Ireland has put the increase down to the rising cost of funding mortgages, the same reasoning given by Halifax and RBS when their SVRs went up. Banks will often use their higher-rate savings accounts to fund new fixed-rate mortgage offers, rather than existing variable rate lending.
What will it cost?Depending on the type of mortgage you have, the rate rise could cost you hundreds of pounds a month. Those on interest-only mortgages will be the worst affected with £150,000 of borrowing costing £561 compared to the current £374 a month - £187 extra, while 25 year repayment mortgages of the same amount will see a £125 a month rise.
What can customers do?
Those in a position to remortgage should look into finding a lower rate. Medium-term fixed rate mortgages (for five years) are a good option at the moment. They give you the stability of knowing exactly what you'll be paying each month, plus they have an advantage over shorter term fixes (two years) of not leaving you looking for a new deal right when rates are on the increase.
If you're happy to take on a bit of a risk, then low lifetime trackers are also a good option to consider. With the base rate still low these offer some of the most competitive rates available, and have the advantage of not charging a fee if you do want to make early repayments while the rates are low. Remember though that you will have to pay more when the base rate rises.