Tracker alert for borrowers on fixed rate mortgages
THOUSANDS of homeowners could end up missing out on valuable tracker deals if they fail to check out their mortgage contracts.
Large numbers of homeowners who chose to fix the rate on their mortgage may be entitled to revert to a tracker when they complete the fixed period.
Trackers are the best value in the market, especially as European Central Bank rates are due to fall up to three times by next spring.
Frank Conway of MoneyCoach advised people to dig out their contracts and check the fine print. Some 200,000 people have fixed rates.
ECB rates were unexpectedly cut this month with the possibility of another cut on December 8.
The worsening eurozone debt crisis means rate cuts are more likely. Most of those coming to the end of a fixed rate deal end up on a variable rate.
Variable rates are far higher than tracker rates, meaning that a homeowner who can get back on to a tracker could save hundreds of euro.
Most other lenders have pushed through a series of savage rises in variable rates over the past two years, even at times when official eurozone rates have not moved.
This means that some of those on variables are paying up to €250 a month more in repayments than those on trackers, for the same sized mortgages.
Large numbers of homeowners who took out four and five-year fixed rate deals in 2006 and 2007, before trackers were withdrawn, have contracts that allow them to revert to a tracker once the fixed period is up.
"There are likely to be mortgage holders who took out four and five-year fixed rate deals who may have forgotten about the terms of their contracts.
"Some may be about to receive a windfall in lower monthly repayments but it is important they are aware of this and lock into the lower repayments," Mr Conway said.
Between 2006 and 2007, four and five-year fixed rate mortgages were costing between 4.5pc and 5.5pc. For fixed-rate mortgage holders who are now due to roll back to tracker deals, the monthly repayments on a €250,000 mortgage will fall from about €1,266 to about €988.
Mr Conway said it was important that mortgage holders check their mortgage contracts to see if they can revert to a tracker mortgage.
Four lenders have had to restore consumers back on to trackers after failing to honour contracts by offering this option when the homeowners had completed fixed rates.
Bank of Ireland had to restore more than 2,000 mortgage holders to trackers.
Bank of Scotland, AIB, and Permanent TSB, have all had to put homeowners back on trackers and refund customers.