New plan to allow banks axe trackers in debt write-off deals
BANKS should be able to take valuable trackers off homeowners who are getting a deal on their debts, the Central Bank will propose.
At the moment banks cannot touch a tracker, even if they are offering a homeowner a deal to write off their debts.
But the regulators are proposing a radical change that would allow people who are entering into a deal with their lender to offer up their valuable tracker mortgage, the Irish Independent has learned.
Financial expert Karl Deeter said this would be the first time banks would be able to legally take trackers off mortgage holders.
"This is a chipping away at the fortress built around trackers," he said.
A statutory rule book – the Code of Conduct on Mortgage Arrears – stops any attempts by banks to take trackers off those in mortgage trouble.
The code states that lenders must not require a borrower to change from a tracker to another mortgage type, as part of an arrangement for those in arrears or about to go into arrears.
But a proposed change to the code, to be issued in the next two weeks, seeks to drop this strict condition.
The revised code will be put out for consultations and the views of the public sought.
Some 375,000 residential mortgage accounts are on tracker rates.
The interest rates on these can only rise when the European Central Bank rate moves.
The rates tend to be set very low, with the average tracker rate 2pc at the moment, compared with average variable rates of 4.3pc.
Someone with a €300,000 variable is paying €350 more a month than someone with the same-sized loan on a tracker rate.
Banks claim they are losing millions of euro every year on trackers.
It is understood the Government has come under pressure from the troika to relax the strong rules around trackers, especially for those seeking a debt write-off.
One inside source said: "The question is being asked, if someone is getting €150,000 written off their mortgage, then why should they get to keep their valuable tracker?"
The source said there would be no financial gain for the bank from getting rid of a tracker if they are writing off a big chunk of debt, but it would establish the principle that trackers are no longer be untouchable.