Paul from Dublin has been in touch with a story we think is instructive. He says he succeeded in persuading Bank of Ireland to reduce the interest rate on his mortgage, thereby saving himself more than €700 in interest payments this year alone.

“All borrowers on standard variable rate mortgages should be pressurising their lenders to reduce the rate,” he says. “I’ve been with BoI over 30 years, since I was student, but I’m sick of paying penal mortgage rates. The cost of borrowing money is minuscule at the moment, yet the bank was charging me 4 per cent.”

This was based on what Paul says was “a completely false loan-to-value calculation, because the original loan sum included bridging finance, which was paid back within months, when the sale of our old house went through”.

The money borrowed was used to refurbish his house, thereby increasing its value. “So our loan-to-value is less than 25 per cent,” he says, “but this wasn’t reflected in the mortgage interest rate. KBC Bank were offering 3.75 per cent, plus a further 0.2 per cent reduction if I moved my current account.

“It’s a big inconvenience to move, but I was prepared to do so in view of the long-term savings to be made over the remaining 15 years on the mortgage.

“But first I rang Bank of Ireland and told them I intended moving. I expressed my dismay that I was being treated so badly after so many years as a loyal customer. I made it clear my LTV was far lower than they were giving me credit for. I threatened to move my current account as well.

“To be fair to the bank, they came back and knocked 0.3 per cent off my rate, without requiring a house valuation.

Paul believed that was still too high, and he pressed for a further improvement. “But they wouldn’t budge. They have presumably calculated I’m less likely to go to the trouble of moving for the sake of a further 0.15 per cent improvement over at KBC,” because you have to employ a solicitor to do the legal work and obtain a valuation.

Paul is mad as hell about the high standard variable rates that people are paying. “I’m angry that we are paying the cost of recapitalising Bank of Ireland. If the Government wanted to find one thing that would help it regain popularity, it would be to pressurise the banks to lower their rates; this would be worth far more in our pockets than the cost of any water charges. But my experience shows that consumers also need to put more pressure on the banks by threatening to switch their business.”

When bonus protection doesn’t add up

A reader call Tim is baffled. He has car insurance with Allianz Direct, which is selling a product called Bonus Protection. “Essentially, this is an insurance policy that insures your no-claims bonus. So in the event of a claim, the anticipation is that you don’t have a related increase in your insurance policy the next year,” he explains.

“I got a knock in the supermarket car park on Wednesday so called Allianz about claiming. I explained my bonus protection scheme.

They told him “it was important I know how bonus protection worked. He said it did not mean a crash was not considered in next year’s premiums, as most people think. In other words, a claim will be included in the calculation of next year’s premium, even if you have bonus protection insurance.”

Tim was given an example. He was told that if the “base rate” for car insurance was €1,000 and you have a 60 per cent no-claims discount, your policy should cost, without extras, €400. “Next year, as a result of your claim, your policy might rise to €2,000, but, because your bonus is protected at 60 per cent, the 60 per cent still applies. So on a €2,000 policy, you pay €800.”

He then found out that he is allowed one claim every three years under the bonus protection scheme. “But the scheme is renewed annually at a cost of about €60. So what am I paying for in year two and three, if I can’t claim – or is the real cost of bonus protection €180?”

He then does the maths. “If the cost of repair is about €500, and I have a €250 excess, then I pay €250 plus the bonus protection payment in year two and three, which adds €120, bringing my contribution to the €500 repair bill to €370, plus a potential doubling of my insurance costs next year. My insurance costs are about €360 per year, which means that in order to get the insurance to pay the €500 repair bill, it could cost me €360, plus €370 – a total of €730 to have the insurance pay the €500 repair bill, plus additional costs.

We contacted Allianz, and a spokesman said “bonus protection” was not “premium protection”.

“Where ‘no-claims bonus protection’ cover has been opted for, the value of the bonus or ‘discount’ to be applied remains intact, but the underlining premium can change if the driver has an accident.” The spokesman suggested our reader contact the Financial Ombudsman if he was not happy.