Monday 23 April 2018

Owners told: pay more off your tracker after rate cut

Homeowners are getting conflicting messages on tracker mortgages
Homeowners are getting conflicting messages on tracker mortgages

Charlie Weston Personal Finance Editor

TRACKER mortgage holders who are in line for a boost this week with a new cut in interest rates have been advised by a banking expert to overpay their mortgages.

But this advice has been questioned by consumer advocates who argue that trackers are cheap and it would be better to save the money.

The European Central Bank is expected to cut rates for the seventh time on Thursday.

A family with a €250,000 mortgage will see their repayments fall by €20 a month, which works out at €250 over a year.

Banking expert David Kelly, of HML Ireland, said the 375,000 homeowners with trackers should take advantage of the new cut to maintain the repayments at the same level, effectively overpaying their mortgage.

Mortgage servicing group HML has been appointed to manage a portfolio of Irish residential home loans that was once owned by Bank of Scotland (Ireland).

“Overpaying is a prudent course of action and could potentially save thousands of euro off your mortgage,” Mr Kelly said.

ECB interest rates have come down from 4.5pc in July 2008 to 0.25pc at the moment. It is expected that they will be cut to 0.1pc on Thursday.

Over the last six years, it is estimated that tracker holders have saved around €6,000 a year due to the rate reductions.

Every time the ECB cuts rates,

tracker holders see the rate they pay go down.

But founder of Brendan Burgess says it makes no sense to overpay a tracker mortgage when rates are at historically low levels.

“I would say that you should absolutely not overpay your tracker. All of the banks allow you to move your tracker to a new property. If you

overpay, you will lose the value of that tracker.”

He said this would mean movers would end up borrowing additional funds at much higher variable rates.

And those who overpay a tracker will be losers if banks offer deals to buy out tracker mortgages.


Mr Burgess said typical mortgage costs for those on a tracker were 1.5pc, but a car loan from a bank was 10pc. Extra funds would be better used to pay off more expensive borrowings.

And finance expert Frank Conway said it was crazy to overpay on a tracker. “This is a bonkers suggestion in light of the fact this will only apply to tracker mortgage holders, many of who are practically borrowing for free these days,” said Mr Conway, the founder of, a financial literacy website developed for students and adults.

He said families should instead strive to have a small financial nest egg in case they have a financial emergency, such as a car breakdown or small home repair bill.

This will allow them avoid high-cost borrowing such as credit card cash advances or moneylenders.

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