Mortgage customers won't be penalised, says BoSI
BANK of Scotland/Halifax has promised not to penalise any of its mortgage customers who are coming off fixed rates by putting them onto very high variable rates.
The bank admitted it could easily push up standard variable rates to uncomfortable levels for those mortgage holders caught in a negative equity trap.
But it insisted it was not in its interests to do this as this would only push mortgage customers into arrears.
When asked if the bank was free to impose penal standard variable rates on any of its mortgage holders coming to the end of fixed rates, a spokesman confirmed: "Yes, we can apply whatever rate we want to but it would (not) be in our interests to do that.
"We don't want customers to get into financial difficulties."
The bank said Halifax's current standard variable rates were between 2.4pc and 3.3pc.
Lenders are free to increase standard variable rates for existing customers whenever they want. For those who took out mortgages through a broker from Bank of Scotland (Ireland) BoSI, the standard variable rates range from 2.5pc to 6pc, the bank admitted.
The spokesman said its customers had the option of choosing a new fixed rate.
But mortgage brokers pointed out that it has some of the highest fixed rates in the market. The BoSI three-year rate is 7.25pc, compared with 3.19pc from AIB. Over five years, the BoSI rate is 7.35pc, compared with 3.82pc from AIB.
Halifax is the retail offering from the Scottish bank, while BoSI was the brand name used for mortgages sold through brokers, and business banking operations.
Frank Conway of Irish Mortgage Corporation said BoSI was quoting a standard variable rate of 5.9pc for home loans up to 80pc loan to value. This compared with a market average standard variable rate of 2.96pc.
Consumer choice took a blow with the Scottish bank to close its Flexi-Saver, Child Saver and Monthly Saver accounts, which had the highest rates in the saver market.
The Flexi-Saver rate was up to 3.75pc for amounts up to €10,000.
Asked about customers with overdrafts, the Halifax/BoSI spokesman said customers could continue to use the agreed overdraft facility on their account under current terms until their switch to an alternative provider was complete. But this is provided they have completed the switch "within the necessary time-frame".
"If they are not switching their account, as per the terms and conditions, the overdraft will need to be cleared as part of the account closure process.
"If customers are unable to pay off their overdraft they will be asked to contact our collections department to discuss the options available to them," the bank said.