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I don't know why a tracker mortgage is costing banks


partnership

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Feb 2, 2011
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Maybe I am being too simplistic but this is how it looks to me.

The bank borrows 100000 from ECB at 3% over 20 years - they then repay this
Mary borrows 100000 from the bank on a tracker 3% plus% and repays it monthly over 20 years.

Is the bank not making a 1% profit?

The bank has 100000 on deposit and pays 1% interest
It lends the money out on a tracker at 3% plus 1% - is this not a 4% profit?
 

Paddyc

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Mine is ECB + 0.9% and like yourself DD, I don't see the bank making money on that.
 

wexfordman

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I think they need to publish the names of everyone in the country with a tracker mortgage, the feckin parasites :)
 

Mad as Fish

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Our bank certainly cocked up, they were that desperate to shove money into peoples pockets that a tracker mortgage was the first thing they offered us.
 

Watcher2

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Mine is ECB + 0.9% and like yourself DD, I don't see the bank making money on that.
Well, weren't the banks getting funding from the ECB at 1%, or the ECB rate so whenj the rate reduced, the banks got the reduced rate. So in effect, they were still making money?

Eitherway, it shows how inept their own commercial policy was and still is. In normal functioning times, they gave out mortgages as lonmg term loans and only financed those mortgages with short term debt from the interbank market. Jaysus, what kind of muppetry is that?
 

dizillusioned

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I think they need to publish the names of everyone in the country with a tracker mortgage, the feckin parasites

Seeing as they dont have a symbol for it.... NAh nah ne nah nah (Sticking tongue out)
 

ivnryn

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It depends on what you mean by "cost".

The fundamental problem is that banks assumed that they could get cheap money from the ECB and then added a margin on top of that. However, that requires that they are solvent.

Once they give out a loan that money is "gone" and in exchange they get an agreement to pay back the mortgages.

Tracker mortgages are an asset of the banks. They could sell them for cash. The problem is that if they did that, it would be obvious that they had lost money.
 

Picasso Republic

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May 31, 2011
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Banks sourced their funding via short and medium term bond offerings at a considerably higher interest rate than the current ECB base rate.

Have any of you scratched your heads over the past few years and wondered "why all the talk of bonds and repayment"?.
 

hammer

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Pillar Banks should let us overpay mortgage and get extra credit similar to permanent TSB offer :)
 

wexfordman

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I think they need to publish the names of everyone in the country with a tracker mortgage, the feckin parasites

Seeing as they dont have a symbol for it.... NAh nah ne nah nah (Sticking tongue out)
Dude, my name would be on the list too you know, so put your feckin tongue back in your cheek, and while you at it, brush your teeth!!
 

cabledude

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Jan 23, 2011
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As far as I can make out, the PTSB and other banks borrow their money form the markets and not the ECB. The ECB is providing cash to put into cash machines and tills etc. But the money for mortgages is borrowed from the bond markets. The bond markets charge say, 3%. And the trackers are on for example ECB+1% (some lower than this and some higher) ECB rate is 0.75%

So the banks are buying money at 3% and selling it at 1.75%. Serious loss there. I can understand those on Variable rates being pissed. They are being charged more that they should be to help prop up the banks balance sheet.

My tracker is ECB + 1.3%
 

ffc

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As far as I can make out, the PTSB and other banks borrow their money form the markets and not the ECB. The ECB is providing cash to put into cash machines and tills etc. But the money for mortgages is borrowed from the bond markets. The bond markets charge say, 3%. And the trackers are on for example ECB+1% (some lower than this and some higher) ECB rate is 0.75%

So the banks are buying money at 3% and selling it at 1.75%. Serious loss there. I can understand those on Variable rates being pissed. They are being charged more that they should be to help prop up the banks balance sheet.

My tracker is ECB + 1.3%
I'm still not convinced that tracker mortgages are valid, in the sense that most of them are based on a LTV and that ratio has clearly changed in the last few years. I imagine the banks are under goverment pressure not to revalue houses and throw the tracker contracts into the bin, but if they sell these trackers to hedge funds or other vultures that may change.
 

zakalwe1

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Oct 3, 2008
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the banks slipped up...
at the time these were offered, the ECB base rate was above the Euribor rate.
had the mortgages been tracked/indexed to Euribor, then the rates on the mortgages would be approx 5-6%.

the main reason banks are haemorraging cash is that the loans are earning interest of 2% approx but are funding the loans at a rate of 5-6% if not more.
the gap between the two is the reason every transaction, receipt, visit etc will be charged in order to recoup the cost.
 

cabledude

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I'm still not convinced that tracker mortgages are valid, in the sense that most of them are based on a LTV and that ratio has clearly changed in the last few years. I imagine the banks are under goverment pressure not to revalue houses and throw the tracker contracts into the bin, but if they sell these trackers to hedge funds or other vultures that may change.
Valid in what way?
 
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