It has written to 1,200 of the 13,500 homeowners facing sharp increases - despite taking out tracker deals linked to the historically-low Bank of England base rate - to tell them they will no longer be applied in their cases. The bank said the Financial Conduct Authority (FCA) was "supportive of our approach in excluding these customers".
Customers were told of the decision to raise their rates - which in some case would double, lifting payments by hundreds of pounds a month - earlier this year. Many had taken out loans with BOI subsidiary Bristol & West. The changes came into effect this month.
But consumer group Which? said it believed they were being treated unfairly, pointing out that some were sold a "lifetime tracker". It urged customers to complain and called on the FCA to ensure better communication from banks about clauses in mortgages.
On Tuesday, the bank announced that it had identified and written to two groups of customers "where we will not be applying the increase to their base rate tracker mortgage". These included 1,000 homeowners who were using flexible facilities on their mortgage account and "received a specific administrative letter linked to their transactions that might have caused some customers to believe the differential was for the term of their mortgage".
Des Crowley, chief executive of Bank of Ireland UK, said: "We have said from the outset that we will review all customer complaints individually and that we are committed to treating customers fairly throughout the process. It is on this basis that we have removed these customers."
But the move still leaves more than 12,000 customers with a steep rate hike - having believed they would stay low because they were linked to the Bank of England rate, currently 0.5%. BOI has told them it was changing the "differential" it applies to the tracker rate.
A typical change has seen a buy-to-let mortgage holder previously on a rate of 2.25% - made up of the base rate plus 1.75% - rise to 4.99%, representing the Bank rate plus 4.49%. For residential customers, changes will be introduced in two stages. From this month, they will pay the Bank rate plus 2.49%. On October 1, it goes up to Bank rate plus 3.99% - currently 4.49%.
BOI blamed the rise on increased 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. It said customers were free to move to other providers and that no early repayment charges would apply. Most of those affected had buy-to-let loans.