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Some good news for homeowners: Transfer of tracker mortages to be allowed.


Sync

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Let's all be clear here: Tracker mortgage holders have it pretty good. Over a 300k loan, they're making off with €450 savings per month compared to their non tracker equivalent. Additionally, drops in ECB rates see the losses taken by the banks transferred on to non-tracker mortgages, meaning they're effectively paying more so trackers can pay less.

One of the few downsides of the tracker though is the non-transferable nature of it. If I want to move house, then I lose the tracker and move onto a standard product.

Now TSB are to allow people transfer their tracker amount to new mortgages when they want to move, with other banks allowing it for 5 years.


Homeowners can move and keep their tracker mortgages - Independent.ie

For homeowners the advantage is obvious. If you bought a tracker on a 2 bed apt 6 years ago and have since had kids etc, they've felt trapped in that mortgage because the cost of giving it up is so high.

But here's why it makes sense for the banks to do it as well: You can't get out of the tracker rate right now (unless some pretty radical legislation is passed) so you're going to have to take the loss anyway.

But by following this model, they help increase demand for houses (particularly those all important 3 bed semis in Dublin) as well as getting the family to use your bank to get the extra (non-trackered) cash needed to buy. So you're stoking the market and giving out additional loans to people who have already been successfully repaying you up to now.

This isn't going to represent some sea change in the banks fortunes, it's not going to really address the problem of defaulters right now, but it will help the families who are feeling trapped by their trackers.
 

ShoutingIsLeadership

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Can you add a 'some' to the thread title, before 'homeowners', please? :)
 

paulp

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Yes a good step.
I don't understand why the banks with trackers aren't offering some incentive for tracker holders to overpay.
 

ShoutingIsLeadership

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And by raising the price of houses, it will make it a more attractive option to repossess the variable rate mortgage holders, they are currently riding like a €1,000 hooker, rather than give them some relief.
 

ShoutingIsLeadership

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How much will this cost the taxpayer, and will it reduce the banks' chances of returning to profitability? (this is the justification which is always used when it comes to riding variable rate mortgage holders)
 

paulp

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How much will this cost the taxpayer, and will it reduce the banks' chances of returning to profitability? (this is the justification which is always used when it comes to riding variable rate mortgage holders)
How would it cost the taxpayer?
I assume the banks are seeing this barrier to movement in the housing sector as a problem for them and hope this will alleviate it somewhat.
I agree variable holders are in a sh!t spot, what would you suggest be done for them?
 

ShoutingIsLeadership

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How would it cost the taxpayer?
I assume the banks are seeing this barrier to movement in the housing sector as a problem for them and hope this will alleviate it somewhat.
I agree variable holders are in a sh!t spot, what would you suggest be done for them?
If someone sells their house, they pay off their mortgage and the contract ends. I am just asking if there is any impact on the taxpayer, in allowing those mortgage holders to move and keep the terms of a contract which no longer exists.

Variable rate holders? The CBI should put a limit on the rate differential banks can apply over the ECB rate, and the State should offer give more mortgage interest relief to variable rate holders. Simple measures.
 

artfoley56

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D

Dylan2010

its a ok move for the banks , the LTV would probably drop as well if there is a bigger property attached to the same mortgage assuming the buyer is using savings to pay the balance.
 

mctree

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How would it cost the taxpayer?
I assume the banks are seeing this barrier to movement in the housing sector as a problem for them and hope this will alleviate it somewhat.
I agree variable holders are in a sh!t spot, what would you suggest be done for them?
They should form a group that will all agree not to pay their mortgages if another rate hike is imposed on them while banks are losing on trackers.
 

SPN

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How would it cost the taxpayer?
The taxpayer picks up the tab for the losses the Banks make on trackers.

The sooner the trackers are shunted into NAMA the better.




I agree variable holders are in a sh!t spot, what would you suggest be done for them?
Why should anything be "done" for them?
 

Sync

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Variable rate holders? The CBI should put a limit on the rate differential banks can apply over the ECB rate, and the State should offer give more mortgage interest relief to variable rate holders. Simple measures.
So play that through: what happens at the next rate cut? The trackers drop a little bit. Which gives the following options:
1. The banks increase Variable mortgages to compensate
2. The banks (already cashstrapped) take another hit, leading them to take more money from the public.

Personally: We live in extraordinary financial times. We need extraordinary measures. Agree with the banks what impact forcing everyone onto a variable rate would have and do it. This would A: Help the banks and B: put in place a more equal system where Variable holders see their repayments drop and Trackers see theirs increase so everyone's on a level playing field.

Yes strictly it's unfair on the people smart enough to sign up for the trackers, but national good etc etc.

This won't happen of course because those with tracker mortgages will vote en masse against any govt that would put it in place, and the votes you pick up from the Variables wouldn't be enough to offset that.
 

ShoutingIsLeadership

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So play that through: what happens at the next rate cut? The trackers drop a little bit. Which gives the following options:
1. The banks increase Variable mortgages to compensate
2. The banks (already cashstrapped) take another hit, leading them to take more money from the public.

Personally: We live in extraordinary financial times. We need extraordinary measures. Agree with the banks what impact forcing everyone onto a variable rate would have and do it. This would A: Help the banks and B: put in place a more equal system where Variable holders see their repayments drop and Trackers see theirs increase so everyone's on a level playing field.

Yes strictly it's unfair on the people smart enough to sign up for the trackers, but national good etc etc.

This won't happen of course because those with tracker mortgages will vote en masse against any govt that would put it in place, and the votes you pick up from the Variables wouldn't be enough to offset that.
Not everyone who has a tracker is smart. Some were lucky, some were ignorant of what they were doing. Just as some on variables are on variables because they fixed for the first few years of their mortgage (trying to do the right thing) and then got stuck with a variable rate when the fixed period ran out.

I don't think tracker holders should be forced onto a variable. We, as a country, decided to stick our nose into provate banking business, so we should have to face the consequences of that.

The tax system is the way to help variable rate holders.

Oh, and competition law. It is arguable that the banks are abusing a dominant position, in setting the price of variable rate mortgages. Me thinks it's time to take a case.
 

paulp

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So play that through: what happens at the next rate cut? The trackers drop a little bit. Which gives the following options:
1. The banks increase Variable mortgages to compensate
2. The banks (already cashstrapped) take another hit, leading them to take more money from the public.

Personally: We live in extraordinary financial times. We need extraordinary measures. Agree with the banks what impact forcing everyone onto a variable rate would have and do it. This would A: Help the banks and B: put in place a more equal system where Variable holders see their repayments drop and Trackers see theirs increase so everyone's on a level playing field.

Yes strictly it's unfair on the people smart enough to sign up for the trackers, but national good etc etc.
National good? But we don't know the consequences of forcing trackers onto variable rates.
Trackers on average are larger mortgages, due primarily to when they were taken out.
Pushing them onto variable may result in more mortgage defaults, harming the national good.
 

Victor Meldrew

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Let's all be clear here: Tracker mortgage holders have it pretty good. Over a 300k loan, they're making off with €450 savings per month compared to their non tracker equivalent. Additionally, drops in ECB rates see the losses taken by the banks transferred on to non-tracker mortgages, meaning they're effectively paying more so trackers can pay less.
Very good synopsis in the OP, btw...

However, the above sentence really sums up the way us non trackers feel about our subsidised neighbours living in a consequence free reality, at our expense. I would love to know what the effect of removing trackers and sharing the pain" would be?

While I get the need to do this, to enable people to move on, the fallout is that we have a two tier customer base for houses. those with a "cheap" half mortgage and those with a non tracker "expensive" mortgage, going to bid for the same house.


And regarding being "trapped in a Tracker, " If we had a tracker, our mortgage would drop below the monthly rental yield of our house.

Would it not be simpler, and fairer to just allow tracker mortgaged houses to be rented out?
 

Victor Meldrew

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The taxpayer picks up the tab for the losses the Banks make on trackers.

The sooner the trackers are shunted into NAMA the better.
How would this help us Variable rate mugs...?
 

Congalltee

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How do i respond to the silly suggestion of Banks trying to force people out of their tracker, I say pacta sunt servanda.
 

SPN

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How would this help us Variable rate mugs...?
Because the Banks would no longer be making losses on the Trackers, so they would need less margin on the Variables to break even.
 

Sync

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National good? But we don't know the consequences of forcing trackers onto variable rates.
Trackers on average are larger mortgages, due primarily to when they were taken out.
Pushing them onto variable may result in more mortgage defaults, harming the national good.
Agree with the banks what impact forcing everyone onto a variable rate would have

I'm saying to run the numbers first.

http://www.centralbank.ie/stability/Documents/Mortgage Conference/Session 1/Paper 1/Paper.pdf

In terms of outstanding mortgage balance, 54 per cent is made up of loans subject to tracker interest
rates, 30 per cent is accounted for by variable interest rates and 15 per cent on fixed interest rate
contracts (Figure 4a).28 The dominance of tracker-rate mortgages is to be expected given that 85 per
cent of all tracker mortgages were issued between 2004 and 2008 when house prices were at elevated
levels. At a time of relatively low ECB policy rates, the attraction of tracker rate mortgages for the
borrowers who hold them is clear. However, these products carry adverse profitability considerations
for the Irish financial institutions who hold them, given that their funding costs have increased
significantly since 2008.
So eliminating the fixed interest folks, that means that of the remaining mortgage holders split 64% tracker, 36% variable. The variables are carrying the can for every drop in interest rates.

So you run the numbers. You look at what what the impact would be on a variable mortgage and a tracker mortgage at the relevant bands (200k mortgage, 300k mortgage etc and upwards). You look at the % of people who are currently not repaying their mortgages and how they split variable/tracker. You look at what the savings made for the variables would do to those numbers, and what the increased cost to trackers would have.

Right now we have a situation where tracker holders (And I'm a tracker holder) are making out like bandits. Which is fine when it's just the bank/shareholders taking a hit. Here it's the state who are funding the bank and my neighbour who's not on a tracker who faces increased costs because of me.

Simply put, look at the split in the Central Bank's document. Let's say the bandied around number of a 450 saving on a 300k mortgage monthly is true.

Let's say therefore that a monthly basis the repayment on a 300k mortgage is 1000 on tracker, 1450 on variable, and the split between tracker/variable is roughly 2:1.

Would the country be better off with me and my buddy saving 450 a month each over my struggling neighbour on a variable or is it better off evening the board with our mortgages increasing 150 each and our variable friend's dropping by 300, thus making the repayment the same 1150 for all of us?
 
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