Bank breaks 'tracker mortgage trap' by allowing movers keep cheap rates on new homes
A generation of tracker mortgage holders who were unable to move because of fears of losing the lucrative rates have been handed a fresh lifeline.
Bank of Ireland has made it easier for people trading up to hold on to their tracker rate by deciding they can take it to a new property for the lifetime of the mortgage.
Up until now, people with a tracker who were moving house could only keep the Bank of Ireland tracker rate for five years.
The new policy will help encourage much-needed movement on the property market, and could help free up homes suitable for first-time buyers as families trade up.
Many homeowners with trackers would have bought during the boom and may be desperate to secure larger accommodation for their growing families.
However, the bank will continue to impose an extra 1pc on top of the tracker rate for those availing of the deal.
The new offer is expected to prove attractive to thousands of tracker-trapped borrowers.
The fear of losing an attractive tracker rate has stopped large numbers from moving house.
Just three out of 10 mortgages across the market were sold to movers last year.
The change by Bank of Ireland brings it into line with both AIB, and its subsidiaries EBS and Haven, KBC and Permanent TSB.
These banks allow people to transfer the tracker element of their loan on to a new property also, and also charge between 1pc and 1.25pc extra on the tracker rate.
Someone on a tracker on a typically-sized mortgage will generally pay €300 a month less than a homeowner on a variable rate.
The Central Bank confirmed yesterday that variable rates in this country are the most expensive in the eurozone.
But tracker rates move in line with the European Central Bank rate, at a set margin of around 1pc.
The ECB rate is currently zero but is expected to start rising next year.
New variable rates here are 3.29pc, according to the Central Bank.
Bank of Ireland customers who have a tracker will now be able to take the tracker rate with them until the loan reaches the end of its term.
Any extra finance needed to buy another property will have to be taken out by opting for a variable or fixed rate.
Head of mortgages at Bank of Ireland Shane Quinlan said: “Tracker for Mover is a tracker interest rate for homeowners who have a Bank of Ireland mortgage loan with a tracker interest rate and want to move home.
“It lets movers keep the option of a tracker rate on their new home loan, applied to the amount they owe on the tracker mortgage loan they have now.”
And the change will apply to those who have already moved home with a tracker.
“The product applies to existing Bank of Ireland tracker customers, and Bank of Ireland tracker customers who moved their tracker when the five-year limit applied,” he added.
“We first brought out the five-year product in 2013.”
The bank has yet to formally announce the change, which was spotted on the Askaboutmoney.com website.
Founder of the site Brendan Burgess said: “A lot of people are really surprised to hear that they can keep their trackers, even if the rate is increased by 1pc.”
Mover-purchasers need a 20pc deposit of the new home’s value, which can be made up from any profit they make from selling their original home, or from savings.