Lure of tracker mover deals is fading for some homeowners
Published 27/07/2014 | 00:00
BANKS are reporting a slow take-up of new options for those with trackers to keep that deal when they move house.
What was initially hailed as a breakthrough is proving less attractive the more people look at it.
Homeowners are realising that if you are lucky enough to have a tracker and want to transfer it to a new property, the strict terms and conditions wipe much of the gloss off it.
Tracker transfer products are seen as means of unblocking the bunged-up housing market. People fortunate to have one are reluctant to move for fear of losing the mortgage deal of the century.
Most are on a margin over the European Central Bank rate of 1pc, meaning they are paying just 1.15pc. Compare this with a typical standard variable rate of 4.5pc.
This means it is not unusual for a tracker holder to be paying €300 less a month than someone with the same-sized mortgage on a variable rate.
And many of those on trackers are in negative equity - they owe more than the property is worth.
Now, most banks will let you move and keep the tracker. But there are drawbacks.
You get to keep the tracker rate and move that element of borrowing on to the new property only. Any additional funds needed are at the bank's much higher variable rate.
And banks are adding a margin to the original tracker rate when it is moved on to a new property.
AIB, Haven and EBS add an extra 1pc margin, for the remaining term of the tracker.
KBC Bank also allows retention of the existing tracker for the full term of the existing mortgage, but with an added 1.25pc additional interest rate.
Permanent TSB also allows retention of the tracker for its remaining term, and adds a margin of 1pc.
But both Ulster Bank and Bank of Ireland restrict the tracker rate to just five years.
Bank of Ireland adds an extra 1pc to the existing margin over the ECB rate.
With Ulster Bank, the tracker portion of your lending that you are porting to a new home will have an additional interest added on to the exiting tracker deal, depending on your loan to value.
What banks are doing here is offering you a new version of your old mortgage, but with more profit margin in it for them.
By all means look at a tracker transfer option if you need to move house. And contact the bank directly.
Brendan Burgess - founder of Askaboutmoney.com - is aware of one case where a Bank of Ireland customer lost their tracker because they used a broker who switched them to a different lender on the grounds that the rate was cheaper. The broker did not advise his client that they could have applied to Bank of Ireland directly and retain the tracker. The borrower will now pay an extra €30,000 interest over five years.
Sunday Indo Business