MPs rebuke UK regulator over Bank of Ireland rate hikes
THE head of Britain's new market regulator has suffered a public rebuke from MPs over its handling of Bank of Ireland's controversial decision to hike mortgage rates there.
Martin Wheatley, the incoming chief executive of the Financial Conduct Authority (FCA), has been ordered by the UK's Treasury Select Committee to give more information on Bank of Ireland's decision. The TSC said Mr Wheatley's letter explaining the regulator's actions did not "address the main issues".
"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 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," wrote Andrew Tyrie MP, chairman of the committee in a letter to Mr Wheatley.
The public admonishment of Mr Wheatley, current head of conduct at the Financial Services Authority (FSA), comes days before he is due to take charge of the FCA.
In his letter to the committee, Mr Wheatley had said the FSA did not plan to take any action against Bank of Ireland over its rate hike that hit 13,500 British customers with higher mortgage repayment costs despite no charge in underlying interest rates.
"As these mortgages fall outside of our regulatory remit, we do not plan to take further action in respect of the increase to the differential [the difference between base rates and the additional interest charged by the bank].
"We have reviewed the terms and conditions provided to us by the Bank of Ireland UK, and did not identify any concerns which led us to believe the terms may be unfair," wrote Mr Wheatley.
At present, Bank of Ireland has a range of tracker mortgage products, with some customers paying as little as 1.75 percentage points over the Bank of England base rate (Bank Rate).
However, the lender has warned that from May 1 all residential mortgage customers will see the rate they pay rise to 2.49 percentage points above the Bank Rate, with a further increase to 3.99 percentage points from October 1.
For buy-to-let customers, the increase will be even steeper, with their rate set to increase to 4.49 percentage points above the Bank Rate from May 1.
Bank of Ireland told customers that its decision to bump up its rates followed "the significant increase in the cost of funding these mortgages since 2008 and the need for banks to maintain greater levels of capital".