Ulster Bank hits tracker borrowers who want to move house
Ulster Bank has shut off the option for people in negative equity to keep their tracker mortgage for the full term when they move to a new property, the Irish Independent has learnt.
The option allowed a family that owes €200,000 to move that amount at a cheap tracker rate to the mortgage on the new property, and borrow any extra money at a variable rate.
The prevalence of cheap trackers and negative equity are seen as key reasons people will not move house.
This has contributed to a shortage of family homes, particularly in Dublin.
But now Ulster will only allow movers who are on good-value trackers to keep the tracker for five years, and at a much higher interest rate.
The move is similar to the tracker transfer product offered by Bank of Ireland.
Founder of the Askaboutmoney.com website, Brendan Burgess, said: "This is not as good as the deal Ulster Bank was doing, when it allowed you to retain your tracker for the period."
Typical tracker interest rates are set at 1pc above the European Central Bank (ECB) rate, which will mean an interest rate of 1.25pc.
Ulster Bank will allow the amount still owed on the tracker to be moved to the mortgage for the new home – but this will be charged at a higher margin over the ECB rate, and that rate will only apply for five years. After that the customer will have to pay a fixed rate or a variable rate of 4.5pc.
Mr Burgess has calculated that those paying 1.25pc on their tracker at the moment will likely end up paying 2.5pc on the new five-year tracker amount that is transferred on to the new property.
He said this could mean a family buying a new home for €300,000, which includes €80,000 of negative equity from the last property, would end up paying an extra €6,000 over five years under the new Ulster Bank arrangement.
It is understood the original Ulster Bank tracker transfer had a poor take-up from customers, despite being seen as generous by financial experts.
A spokeswoman for the bank said: "In response to customer feedback, Ulster Bank has launched new options for existing mortgage customers who wish to move home.
"These products offer clear and transparent options for those who wish to consider them."
Bank of Ireland has a tracker transfer deal but it increases the margin on a tracker mortgage being transferred by an extra 1.3pc. Trackers are so cheap at the moment that the 375,000 homeowners who have them are reluctant to move house because they will lose the valuable mortgage rate.
Permanent TSB was close last summer to launching a new deal that would see families keep their tracker rate, but the launch has been delayed.