Interest Rates

average_runner

After reading an article saying banks would like to buyout people with trackers, what do people think will happen with interest rtes, how high will they go, how low??

Sleepy

They certainly won't be going lower...

ei.sdraob

average_runner wrote: »

After reading an article saying banks would like to buyout people with trackers, what do people think will happen with interest rtes, how high will they go, how low??

The will go as high as needed by the banks to cover the large holes in their balance sheets

so i presume it will be "high" , they are already moving rapidly northwards despite the ECB rate

Bill2673

Can you qualify your question?

Do you mean the European Central Bank base rate currently set at 1.0%?

Or do you mean the variable rates that banks charge on mortgages?

Two different things.

In ways, the tracker issue has nothing to do with the 'level' of interest rates.

The issue is that the banks are on earning enough profits on tracker mortgages, given that their own funding charges have risen.

Therefore, they need to 'reprice' their customer base....namely getting customers on average up to a higher interest rate relative to what the ECB base rate is.

That issue is regardless of what the underlying ECB rate is.

In very simple terms; at present on trackers the banks receives 0.5% more than the ECB rate. But the funding for this that the bank pays out is 1.0% more than the ECB base rate. Therefore the bank is making a loss. To make a profit, it needs to get that tracker customer paying a spread of greater than 1.0% above the ECB rate. (Hyptothetical example). That holds whether the ECB rate is 1.0% or 10%.

Welease

Interestingly enough, i read they may than do more than offer to buy out the trackers.. they may force people off their trackers..

Apparently there are conditions which state a loan to value rate cannot exceed 80% for trackers. The banks may looks to revalue people's properties (downwards given the current markets) so it fails the 80% limit, and therefore can force them to renegotiate their mortgage to a non tracker..

Bill2673

Thats interesting, where you see it?

Welease

Bill2673 wrote: »

Thats interesting, where you see it?

http://www.irishtimes.com/newspaper/pricewatch/2010/0503/1224269584985.html

"Nonetheless, speculation is mounting that the banks may step up their action on trackers. According to Deeter, the most likely action banks might take is on the loan-to-value (LTV) covenant inherent in many tracker contracts. If, for example, you got your tracker on the basis that you had an LTV of 80 per cent, whereby the mortgage represented only 80 per cent of the value of the property, the bank could look to switch you on to a higher rate. They would do this saying that because of the decline in house prices, your LTV may now be closer to 100 per cent, and so you might no longer qualify for the lower rate. “It won’t be fair, but it would be a fair argument that they could present,” says Deeter.

And don’t think that administrative issues could stop the banks from requesting new valuations of properties on their loan books. “If I was a banker, I’d say, we’ve looked at property prices in your area, we think they have declined by 40 per cent, we’ll give you three months to come back to us with a valuation,” says Deeter. “The banks will offset the work on to the individual.”

If the banks were to go down this route, homeowners would then have two options: either inject a lump-sum to pay down the mortgage to the required level and stay on the lower tracker rate, or be switched to another rate, which would probably be a tracker in a higher LTV band."

average_runner

it also states the following:

While Conway believes most tracker contracts are “very tight”, and thinks it unlikely banks could look to change their terms and conditions, he warns that homeowners might nonetheless “open up their own vulnerability”.

Welease

average_runner wrote: »

it also states the following:

While Conway believes most tracker contracts are “very tight”, and thinks it unlikely banks could look to change their terms and conditions, he warns that homeowners might nonetheless “open up their own vulnerability”.

Well hopefully.. but at this stage, I would bet the banks are looking at any opportunity to get people trackers (and who can blame them)

Drumpot

In some cases there can be a 2%-3% differance in having a tracker v Variable at any given time. .

On a 300k mortgage, in one year, the differance in interest could be up to €9,000, so for me to switch off a tracker mortgage I would want to be getting a significant lump sum offer to do so . . My figures are vague because it can differ between Mortgage providers and at different times, but dont be fooled into getting off your tracker with a special offer . .

Any variable rate or special rate now will possibly increase dramatically in the near future . .

Remember, banks NEVER do things for the greater good and always have a financial motive behind making decisions . .This could be the biggest decision anybody ever makes . .

Welease

Drumpot wrote: »

In some cases there can be a 2%-3% differance in having a tracker v Variable at any given time. .

On a 300k mortgage, in one year, the differance in interest could be up to €9,000, so for me to switch off a tracker mortgage I would want to be getting a significant lump sum offer to do so . . My figures are vague because it can differ between Mortgage providers and at different times, but dont be fooled into getting off your tracker with a special offer . .

Newstalk used an average figure of 230 Euro extra per month on a 300K mortgage yesterday (based on a 1.75% tracker iirc).

me_right_one

I think I'm being screwed by my bank looking at all these posts. I'm on a tracker. I borrowed 125K when the ECB was about 2%. The bank said they could impose 2% more on top of that, but wouldnt unless things went pear shaped, but, I'd never be charged more than the 2% plus ECB rate. On DAY ONE, they implemented their extra little 2%. This was during the boom when nobody would've said the banks were in trouble. So there I was paying around 3.9, 4 all along while people on variable were paying less. Now, the bubble has burst. What is the current ECB rate? I'm still on tracker, but now being charged 4.5%. WTF?

Welease

me_right_one wrote: »

I think I'm being screwed by my bank looking at all these posts. I'm on a tracker. I borrowed 125K when the ECB was about 2%. The bank said they could impose 2% more on top of that, but wouldnt unless things went pear shaped, but, I'd never be charged more than the 2% plus ECB rate. On DAY ONE, they implemented their extra little 2%. This was during the boom when nobody would've said the banks were in trouble. So there I was paying around 3.9, 4 all along while people on variable were paying less. Now, the bubble has burst. What is the current ECB rate? I'm still on tracker, but now being charged 4.5%. WTF?

You need to speak to them.. My tracker is 1.6% (1% ECB + 0.6% on base rate)

72palmer

this is very interesting, I am just coming out of a fixed rate of 4.85% and we are
being offered a Tracker Variable ECB + 1.35 which will be 2.35% would I be crazy not to grab it as quick as I can?????

moonshadow

Can you tell us by which bank,i thought none of them were offering trackers

Sarn

Some older contracts indicate that when you come off a fixed rate you'll move on to a tracker. The case above would appear to be one of those as no one AFAIK are offering trackers unless they're obliged to.

helimachoptor

72palmer wrote: »

this is very interesting, I am just coming out of a fixed rate of 4.85% and we are
being offered a Tracker Variable ECB + 1.35 which will be 2.35% would I be crazy not to grab it as quick as I can?????

moonshadow wrote: »

Can you tell us by which bank,i thought none of them were offering trackers

A lot of people had trackers as options when they signed their mortgage, take it palmer!!!

72palmer

It is BOI, I also thought that but they said it was in the original aggrement

average_runner

Take whatever you can get and run out with a big smile and to the closest pub and say cheers for my tracker:D

NinjaTruncs

I can't see the 80% LTV rule working/being true, i was switched to a tracker after two years fixed and i was nowhere near 80% LTV, they would have set a precedent by giving it to me and i'll fight hard to keep it.

Gumbo

72palmer wrote: »

It is BOI, I also thought that but they said it was in the original aggrement

take it like a shot!
im with Halifax on ECB + 1.25% Tracker and sticking to it for the foreseeible future.

Welease

I'm not suggesting that the banks would attempt to profit for peoples naiviety but I would pay close attention the + amount when being offered a tracker..

Mine is ECB + 0.6%, some of the ones quoted on this thread are in the ECB + 1.25%+ region.. Not all trackers are equal.. It wouldnt surpise me to see some trackers being offered with considerably more + x% rate.

Banned Account

To the original question, it is my humble opinion that we are headed for a severe bout of hyperinflation. The sheer volume of money being artificially pumped into circulation to stave off the current crisis is staggering. To my mind, no problem has yet been solved, rather leaks have just been temporarily plugged with wads of promissory notes. I'm buying gold and a shotgun, and will ride out the impending sh*tstorm in some non-frequented ghost estate in Leitrim.

The rate of interest on your tracker will mean little when a loaf of bread cost €67.08c

Gumbo

Welease wrote: »

Mine is ECB + 0.6%, some of the ones quoted on this thread are in the ECB + 1.25%+ region.. Not all trackers are equal.. It wouldnt surpise me to see some trackers being offered with considerably more + x% rate.

Just curious, when did you take out your mortgage?
i drew mine down in Oct 2006 and that was the only tracker rate i was approved for.

tbh, i didnt even realise what a tracker was when we got it, we just went through a broker and seemly this was the best deal available at the time as we got a 1 year discount too of ECB + 1% then up to ECB + 1.25% after the first year.

Welease

kceire wrote: »

Just curious, when did you take out your mortgage?
i drew mine down in Oct 2006 and that was the only tracker rate i was approved for.

tbh, i didnt even realise what a tracker was when we got it, we just went through a broker and seemly this was the best deal available at the time as we got a 1 year discount too of ECB + 1% then up to ECB + 1.25% after the first year.

Nov/Dec 2007 (with AIB).. we just moved back from the UK then.

3DataModem

72palmer wrote: »

we are
being offered a Tracker Variable ECB + 1.35 which will be 2.35% would I be crazy not to grab it as quick as I can?????

Take it take it take it take it.

ECB + 1.35 is fantastic. Your LTV must be <40%

Nice Uncle P

just coming off a 2 year fixed 4.9 % with PTSB, they offering me a tracker that's 3.25% above ECB rate or a variable of 4.1% or else fixed rates higher than what I'm currently on.
Didn't know I was entitled to a tracker till i looked at the original draw down contract, which said it was to be offered when the 2 year fixed was up.
Was surprised to be offered a tracker rate still, but 4.25% seems so higher compared to other trackers. (in negative equity so can't switch) any opinions?

Welease

Nice Uncle P wrote: »

just coming off a 2 year fixed 4.9 % with PTSB, they offering me a tracker that's 3.25% above ECB rate or a variable of 4.1% or else fixed rates higher than what I'm currently on.
Didn't know I was entitled to a tracker till i looked at the original draw down contract, which said it was to be offered when the 2 year fixed was up.
Was surprised to be offered a tracker rate still, but 4.25% seems so higher compared to other trackers. (in negative equity so can't switch) any opinions?

WoW that was my concern.. ECB + 3.25% ...

Yes.. its a tracker.. but not as we know it Jim