AIB tracker move set to boost weak home sales
Published 08/03/2014 | 02:30
The housing market is set to receive a massive boost after the country's largest bank said it would allow homeowners retain their valuable tracker mortgages when they move.
A new tracker-transfer product will be offered by AIB and its subsidiaries EBS and Haven, and will be available from the summer.
The taxpayer-owned banking group is the largest mortgage lender and controls around four out of 10 mortgages. More than one-third of its residential mortgages are trackers.
Up to now people with trackers have been reluctant to move as they would lose the low-cost mortgages once they changed house.
This has been cited as one of the key reasons for a chronic shortage of homes for sale in Dublin and other urban areas, prompting prices to shoot up by 14pc in the capital in the last year.
Around 375,000 residential mortgages are trackers, which are regarded as highly valuable, but stifling movement in the property market.
Allowing customers to move house and keep their original tracker is seen as a key to freeing up properties for sale and helping restore the housing market to normality.
AIB, EBS and Haven will charge 1pc more on their tracker rate – but will allow that portion of the mortgage on a tracker to be retained until the end of the term of the tracker mortgage.
If a customer is moving home and wants to borrow more money, they will have to do so at the higher variable or fixed-interest interest rate.
The new tracker arrangement will be available for customers trading up or down from their current home.
The new development emerged in a letter to Fianna Fail's finance spokesman Michael McGrath from AIB chief executive David Duffy.
Mr Duffy's decision to allow his customers to keep their trackers means the majority of lenders in the market will now offer some sort of transfer option.
Permanent TSB led the way and KBC Bank, which issued one in 10 of all mortgages during the housing boom, is set to follow with a tracker transfer deal later this month.
Belgium-headquartered KBC Bank will allow homeowners on a tracker mortgage to move the loan to a new property and pay a slightly higher premium on the tracker rate.
It will match Permanent TSB by allowing its customers to keep the tracker rate for the full term outstanding on their current tracker.
Permanent TSB has reported massive interest in its tracker-transfer product. Their version also allows those opting for it to pay an extra 1pc on top of their existing tracker rate, and retain this rate until the tracker is paid off.
Both Ulster Bank and Bank of Ireland allow qualifying customers to transfer their tracker mortgage, but only for five years.