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Now you can move house and keep your tracker

HOMEOWNERS who have a tracker mortgage will be able to move home and keep their valuable tracker rate.

Ulster Bank is set to launch the radical new offering today in a move that is likely to be replicated by other lenders.

It is the first time a lender in this market will allow a homeowner to retain a tracker, sometimes described as more valuable than a gold bar.

The new lending arrangement will allow borrowers to transfer the outstanding balance of their existing tracker mortgage to their new home, while financing the remainder of the purchase price with a mortgage at an agreed interest rate.

If the new offer takes off, it could blow open the mortgage market, where lending is at a 40-year low.

At the moment the "tracker trap" means that those who have a good value tracker mortgage are reluctant to move to another property because the tracker rate will be ended.

Some of those on trackers have lending rates as low as 0.5pc about the European Central Bank.

This means they are paying as little as 1.5pc.

Homeowners who have to give up a tracker are forced to take up a variable rate loan, where the rates as as high as 5.19pc.

The new offer will also allow those who are in negative equity -- where they borrowed more than their home is now worth -- to move home and keep the tracker.

It comes weeks after this newspaper revealed that Bank of Ireland and Permanent TSB would allow those in negative equity to take the negative equity portion of their loan onto a new mortgage. But these lenders do not allow those taking up the offer to keep their trackers.

Now Ulster Bank is set to let those who have tracker either trade up to a bigger mortgage and larger house, or trade down to a cheaper property.

One source close to the bank explained that if a family has a €300,000 mortgage and need to move to a larger home worth €500,000 they will be allowed to transfer the existing tracker loan to the new property.

The extra €200,000 needed to buy the new home will be borrowed at Ulster Bank existing variable rate of 3.9pc.

Only those on good incomes and those buying a good value property will qualify for the deal.

Profits

Banks are losing money on tracker mortgages. But a deal where someone was repaying a mortgage with both a low tracker rate and a higher variable rate would mean profits for Ulster Bank from the variable portion of the loan.

The deal would also help stimulate the property market. At the moment homeowners are reluctant to move because they do not want to lose a low-priced tracker.

Property prices have been falling now for five years. On Monday the Central Statistics Office said prices were down 49pc, but others have put the fall from the peak of the market at closer to 60pc.

The ongoing falls in home prices have frightened potential first-time buyers and mover purchasers out of the market.

This is despite the Government attempting to stimulate the market with generous tax breaks for new buyers who purchase before the end of the year.

Irish Independent