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Lenders offer sweetener on tracker rates

TRACKER mortgage holders are being offered a financial incentive by major lenders to speed up their loan repayments.

Financial institutions are losing money on most tracker mortgages due to the low European Central Bank (ECB) rate, and they are desperate to get the schemes off their books.

Some of Permanent TSB's borrowers, for example, have tracker rates as low as 0.75pc above the (ECB) rate.

It's anticipated that an individual who pays off €100 could receive credit for €103 under the new deal being considered by Irish lenders.

And personal finance experts said that an incentive to pay off early could be particularly attractive for those with spare cash on deposit.

As well as paying off their mortgage quicker, the idea would also offer the homeowner the chance to save themselves money on interest payments.

Chief executive of the Irish Brokers' Association, Ciaran Phelan, said the move could result in a borrowers' market as mortgage holders negotiate better deals in return for a change in the contract.

But he urged consumers to obtain independent advice before signing into the new incentive deal.

ECB president Jean-Claude Trichet has indicted that an increase in eurozone rates was likely to be announced on April 7. And as many as three increases in eurozone rates are expected this year.

Any rise in eurozone rates will hit 400,000 homeowners who have tracker mortgages, as well as the 200,000 with variable rates.

Earlier this month, AIB pushed up its fixed rates by 1pc.

Mortgage lenders are losing money on most tracker mortgages as they cost them more to fund than they are receiving in interest income. A tracker mortgage tracks the ECB rate and will rise or drop accordingly when the ECB rate moves.


Banks have to constantly replenish their funds but some Irish banks are unable to borrow wholesale markets and are attempting to rely on emergency funding from the ECB, customer deposits and short and long-term funding.

It's thought Permanent TSB is investigating a deal for customers who speed up their repayments and it is also looking at allowing those who are moving house to retain their tracker mortgage in return for paying a slightly higher rate.