KBC mortgage holders have been advised to consider switching to another lender before their mortgages are acquired by Bank of Ireland.
The advice from consumer advocate Brendan Burgess comes after the competition watchdog cleared the multi-billion euro sale of KBC Bank mortgages to Bank of Ireland.
Mr Burgess claimed Bank of Ireland’s “very high rates for existing customers” and its practice of charging existing customers more than new customers will result in a huge increase in mortgage repayments for KBC customers when the mortgages move to Bank of Ireland.
If approved, Bank of Ireland will take over KBC performing loans, including mortgages, as well as its deposits and a small number of non-performing loans.
Among the conditions imposed by the competition watchdog are that KBC mortgage customers will be entitled to the same fixed rate they received at KBC for the remainder of the fixed term of their mortgage.
Customers benefitting from a 0.2pc discount for holding a current account with KBC will be able to carry that over to Bank of Ireland without having to hold a Bank of Ireland current account.
Bank of Ireland has also pledged to offer KBC customers an equivalent variable rate and fixed rate options on their first roll-over post-migration.
But Mr Burgess said KBC customers would still lose out from the transaction.
He said a typical KBC customer whose fixed rate expires today, who has a loan to value of less than 80pc, could fix again for three years at 2.3pc.
The equivalent rate in Bank of Ireland rate is 3pc.
This will mean the customer will pay €2,100 in additional interest each year.
Over the 20 years remaining on the loan the additional interest charge will be €24,757.
Mr Burgess said his submission to the Competition and Consumer Protection Commission “was ignored completely”.
His submission had called for a condition being attached to the takeover requiring Bank of Ireland to treat the KBC mortgages it is taking over as a separate entity.
“The new entity would continue KBC’s existing policies of not offering cashback and of not discriminating between new and existing customers,” his submission said.
He said people whose mortgages are moving to Francesca McDonagh-run Bank of Ireland should switch provider.
“They should wake up and begin the process immediately of switching to another lender – Avant and Finance Ireland have the best long-term and medium-term fixed rates,” he said.
Customers do not need to wait until their fixed rate is up to switch. There may be a small break fee but it will be well worth paying, he said.
Some customers are unable to switch for a variety of reasons.
They should consider fixing immediately with KBC as Bank of Ireland will be contractually bound by this fixed rate for the remainder of the fixed rate period.
Asked about Mr Burgess’s concerns, Bank of Ireland said that subject to final approval of the transaction, KBC Bank Ireland customers with mortgages or loans that are part of the transaction will migrate to Bank of Ireland on the rate of their KBC product at the time of migration.
KBC Bank Ireland customers who benefit from a mortgage or loan rate discount linked to the holding of a KBC current account will retain that discount for the duration of the mortgage or loan.
Bank of Ireland will also offer the variable rate equivalent to that of KBC migrated variable rate customers, as well as Bank of Ireland fixed rate options, to fixed rate KBC mortgage customers on their first roll-over post-migration.