New negative equity mortgage will cost homeowners their trackers
A NEW type of mortgage that will allow those trapped in negative equity to move home will see them lose their tracker.
The so-called "negative equity mortgages" should be made available by all banks, experts said last night.
And there were calls for those who manage to secure the new type of product to be allowed to keep their good-value tracker mortgages.
Bank of Ireland and Permanent TSB are the only two banks who have been cleared by the Central Bank to offer the new type of home loan.
But both confirmed they will not allow those taking on any new mortgage, which has negative equity debt tacked on to it from a previous property, to retain their trackers.
However, experts said the new type of mortgage product has the potential to help revive the depressed property market.
It will allow homeowners who have good earnings prospects to sell up their current homes, and take some of the negative equity debt on to a new mortgage.
It should prove attractive to those who need to move.
Broker body, the Professional Insurance Brokers Association (PIBA), said the new loan arrangements should now be made available by all lenders.
Rachel Doyle of PIBA said: "A lot of people would be willing to trade up if they had the facility to do so. All lenders should be allowed to offer this option to those who are in a financial situation where they can afford to trade up."
But she warned that people considering such a product would be likely to end up losing their valuable tracker mortgage.
"Banks should allow those on trackers to bring the rate with them or, alternatively, they should discount the new mortgage to take into account the fact that the mortgage holder is forfeiting the tracker," she said.
Bank of Ireland and Permanent TSB have said that negative equity mortgages will not be generally available to customers.
The Central Bank has said that any bank that wishes to provide negative equity mortgages must enter into discussions with them.
It said that such products must be based on customer affordability and were likely to be offered to a small number of customers.
Limits are set to be placed on the amount of negative equity that can be carried on to the new mortgage from the old mortgage and the original house must be sold before moving onto the next one.