Thousands of UK homeowners affected by a steep rise in Bank of Ireland (BOI) mortgage rates from today are being urged to make complaints.

Borrowers in some cases face rates doubling even though they took out tracker deals linked to the Bank of England base rate — which remains at an historic low of 0.5 per cent.

Some of the 13,500 customers affected, many of whom took out loans with BOI subsidiary Bristol & West, face payments rising by hundreds of pounds a month.

BOI has been contacting those affected — most of whom have a buy-to-let loan — about the changes, which take affect from today.

But consumer group Which? believes they are being treated unfairly, pointing out that some were sold a “lifetime tracker”.

It says customers should complain to the bank and if they are not happy with the response take the matter to the Financial Ombudsman.

Which? accuses BOI of justifying the changes on the basis of “clauses buried in the small print of mortgages” which were taken out before October 2004.

Which? executive director Richard Lloyd said this was “wholly unfair” and said BOI was “taking advantage of its customers by hiking rates at a time when the base rate is static”.

He added: “Customers should complain if they were led to believe they had bought a ‘lifetime’ mortgage and Bank of Ireland must deal with these complaints quickly and fairly.”

Mr Lloyd urged the Financial Conduct Authority to ensure that all banks communicated important clauses to their mortgage customers and called for better protection for homeowners in consumer legislation.

A typical change will see a buy-to-let mortgage holder who is currently on a rate of 2.25 per cent — made up of the base rate plus 1.75 per cent — see it rise to 4.99 per cent from today, representing the Bank rate plus 4.49 per cent.

For residential customers, changes will be introduced in two stages. From today, they will pay the Bank rate plus 2.49 per cent. On October 1st, it goes up to Bank rate plus 3.99 per cent — currently 4.49 per cent.

BOI blames the rise on increase funding costs and the need for banks to maintain greater levels of capital. It has set up a phone line for anyone worried about the impact of the changes.

The changes affect 7 per cent of BOI’s UK mortgage customers, the lender has said.

The bank said: “This increase is permitted by a specific clause in these mortgage contracts, which allows an increase in the interest rate differential after the guarantee period (i.e. after 31 December 2006).

“This clause was clearly referenced in the pre-sale offer document provided to the customer and the customer’s intermediary prior to completion.”

It said customers were free to move to other providers and no early repayment charges would apply.

However tightened mortgage criteria and falling house prices may mean some struggling to find new deals.

The rate increases do not affect customers who have taken out a mortgage through the Post Office, which has a financial partnership with the bank.

PA