Anyone else pi$$ed of at subsiding tracker mortgages?

BostonB

I think the OP has an idea his head that the variable rate holders will bailout the banks/Country. Thats why the variable rate holder will pay more than the tracker holder. Not that its the tax from both that will pay it. If it gets paid.

Welease

leeroybrown wrote: »

Actually there is an argument that the state/taxpayer is doing so. The fundamental basis of a tracker is that the bank always makes a margin over the cost of funds, where the cost of funds to them is the ECB rate. At any point in time your interest rate on the balance of the €100k is higher than the cost of the bank borrowing exactly this amount of money. The problem here is that the main Irish banks can't use the standard ECB borrowing facilities and are underwritten through our central bank and ultimately bond debt and IMF/EFSF bailout funds which cost a hell of a lot more than the ECB rate. The cost of funds to them for the balance of your mortgage is far higher than ECB + 1%.

Plus the banks engage in more short term lending.. money flows around the system, so if you borrowed 100K @ 1% 10 years ago it's not a single transaction at that point in time, they bank will borrow as required over those 10 years to maintain capitalisation (lol yeah we know).. So if the rates rose to 10% now, and part of your loan was still outstanding, part of their borrowing requirements would include your loan at 10% which would be far higher than the initial 1% you may be still getting charged

(or at least that's how I understand it.. open to correction)

dan_d

You're not subsidising my tracker mortgage.You're covering the banks losses which happened by their risky lending.The tracker mortgages can't be touched because they are tied to something that is out of the hands of the Irish banks (thank god).They are legally binding contracts and to be honest, there's sweet FA you or anyone can do about it.But bear in mind while you're giving out about people you perceive to be doing better than you, we're still paying out repayments and we still have to pay our loans back...unlike the banks.

I should also point out that I heard today that banks are considering allowing those on trackers to overpay every month in order to clear the debt quicker.How times have changed....we wanted to do that several yrs ago when the rates decreased, and the bank wouldn't let us.

JimiTime

I am delighted for those on tracker mortgages, and wish I'd have got one! Don't turn on those getting a good deal, its not their fault if the banks are retards, and have no morals relating to those getting screwed with variables. (I'm on a variable btw:( ) Put your energy into getting a moral solution to the banks abusing the variable holders, without turning on your fellow mortgage holder who are the rare breed who are actually getting a good deal on the back of the banks irresponsible practices.

BostonB

They can only squeeze so much out of variable rate holders. There isn't enough of them, and theres only so much they can pay.

Welease

dan_d wrote: »

I should also point out that I heard today that banks are considering allowing those on trackers to overpay every month in order to clear the debt quicker.How times have changed....we wanted to do that several yrs ago when the rates decreased, and the bank wouldn't let us.

I've been trying to find out more about that.. it was mentioned on Newstalk.. I assume there's more to it than simply overpaying, as I have always overpaid my mortgages, and have been overpaying my tracker since we took it out..

Godge

eamo12 wrote: »

Then so be it - that is a good point. If we all were to get free houses, great, or there might have been some sort of financial meltdown - whatever! But the govt intervened to the effect that now we have one group (variable) effectively subsidizing another (trackers). PPL here think that's great - I don't.

How many times do I have to explain this to you?

When variable rate mortgage holders took out a mortgage, they had a contract with the bank. That contract has not changed.

When tracker mortgage holders took out a mortgage, they had a contract with the bank. That contract has not changed.

What has changed is that instead of liquidating the banks and burning the bondholders and large depositors, the FF government under Cowen and Lenihan guaranteed them and bailed them out.

In explaining to you in an earlier post how tracker mortgages would have been bundled up and sold as a package and their contracts adhered to in the event of a liquidation, I should have explained what would have happened to variable rate mortgage holders.

The tracker mortgages would have been sold at a large discount because of the terms of the contracts. However, the variable rate mortgages would have been sold at a lesser discount because of the ability to raise the rates charged even if the ECB rate didn't change. A predatory bank buying those mortgages would have looked at the mortgages and thought to itself how far can I push up these rates to make a bigger profit before individuals default. It is certain that they would have pushed up the variable rates quicker than the Irish banks actually did (they held back for political reasons) and it is probable that they would have pushed them up higher than they are now.

So, in actual fact, the Government bailout has meant that tracker mortgage holders have paid what they always would have paid but that variable mortgage holders have paid less than they would have paid if the alternative of liquidating the banks had taken place.

leeroybrown

dan_d wrote: »

I should also point out that I heard today that banks are considering allowing those on trackers to overpay every month in order to clear the debt quicker.How times have changed....we wanted to do that several yrs ago when the rates decreased, and the bank wouldn't let us.

I'm surprised they didn't allow you. Did you have a fixed term discount or similar at the time? I always though that a tracker was still classified as variable from a legal point of view and consequently blocks/penalties on repayment had been made illegal. I know people who've reduced the term of their tracker mortgages over the years without issue.

Welease wrote: »

I've been trying to find out more about that.. it was mentioned on Newstalk.. I assume there's more to it than simply overpaying, as I have always overpaid my mortgages, and have been overpaying my tracker since we took it out..

I can't link anything about it but offhand I think the suggestion is that they will incentivise overpayment by giving a bonus to those who pay extra. For example every €100 extra might result in a €103 reduction in the balance. I'm not sure if they're referring to overpayment, reduction of the term or both (and there is a distinction).

lmimmfn

Im not pissed at paying for Tracker mortgages, i bought August last year, fixed at 4.25% for 5 years, but i could be pissed then though lol

xoxyx

And I'm pi$$ed off that Guinness had the foresight in 1959 to sign a 9,000 year lease at a rate of £45 per annum.

Sure, they're screwing the common man Joe. Let's kick them out and that will solve everything.

:rolleyes:

dan_d

leeroybrown wrote: »

I'm surprised they didn't allow you. Did you have a fixed term discount or similar at the time? I always though that a tracker was still classified as variable from a legal point of view and consequently blocks/penalties on repayment had been made illegal. I know people who've reduced the term of their tracker mortgages over the years without issue.
.

No, we always had just a plain simple tracker.We were surprised too, to be honest, we rang them at the time and asked could we just leave our monthly repayments as they were and they said no.They said they'd had a lot of people calling about that. There wasn't really a solid reason for it. I suppose they were thinking about making money on the interest or something, I'm not entirely sure. We have saved a bit and paid a small bit in lump sums off it, but it would have been a hell of a lot easier to have just let us keep paying higher repayments every month.

As for the original topic, yes there is only so much variable customers will be able to afford. But be under no illusions - your hikes are paying for the banks' screw ups. And one of the things that is now viewed as a screw up by the bank are tracker mortgages. However, screaming at those who have tracker mortgages is completely unfair and unfounded. We took out a contract, exact same as you did, and we still have to repay too.It's nothing but pure dumb luck, that we didn't take out the same contracts as you, and vice versa. You're not subsidising tracker mortgages, you're subsidising the huge loans that the banks now have to pay back because they gave out high risk loans to developers, and kept little by way of capital reserves (in other words, they broke all their own rules). And in case you haven't noticed, we're all paying for that (taxes - and in my case, lost job)

I don't condone the interest hikes, because I find it infuriating that the banks have f&*ked up so incredibly badly and are now throwing the consequences back on their customers (who, by the way, are under no entitlement to keep their actual deposits in any of the banks - which would also hurt them....). But shouting about how unfair it is that you made a choice several years ago that is currently not working out very well makes me wonder if you're seeing the bigger picture here at all...ie the banks screwed up, are to blame and why have they not suffered any consequences??

Onikage

Tracker mortgage envy is an ugly thing. Ugly and pointless.

Firefox11

dan_d wrote: »

I should also point out that I heard today that banks are considering allowing those on trackers to overpay every month in order to clear the debt quicker.How times have changed....we wanted to do that several yrs ago when the rates decreased, and the bank wouldn't let us.

Interesting, actually i was advised to do this a while ago but i am thinking of looking into this now.

Welease

Firefox11 wrote: »

Interesting, actually i was advised to do this a while ago but i am thinking of looking into this now.

If possible you should always look to overpay your mortgage.. (although with trackers so low the impact is less atm).. adding regular small amounts does have a drastic effect on the term of your mortgage. We have dropped out 30 year mortgage taken out in Dec 2009 to 14 years already..

I think this is one of the problems that people have when taking out mortgages.. a "flaw" in human nature that has been successfully exploited by people like Andrew Kahr (the Secret History of Credit Cards) when he revolutionised the credit card business..
When people look at mortgages (or credit cards), they base their spending on the minimum monthly payments.. This is how the forms are set up, this is how the bank explain the payments to you.. THIS IS HOW THEY MAKE THE MOST RETURN!.. By looking at the minimum monthly payments, the loan will run for the maximum term, thus accruing the most interest, but more importantly it also makes you borrow more as the sums seem more manageable on a monthly basis..

fliball123

leeroybrown wrote: »

Actually there is an argument that the state/taxpayer is doing so. The fundamental basis of a tracker is that the bank always makes a margin over the cost of funds, where the cost of funds to them is the ECB rate. At any point in time your interest rate on the balance of the €100k is higher than the cost of the bank borrowing exactly this amount of money. The problem here is that the main Irish banks can't use the standard ECB borrowing facilities and are underwritten through our central bank and ultimately bond debt and IMF/EFSF bailout funds which cost a hell of a lot more than the ECB rate. The cost of funds to them for the balance of your mortgage is far higher than ECB + 1%.

But fundamentally that is wrong I get a loan of 100k and I pay back 108k I more than cover what I borrowed...Its not my fault how the banks structured this but the actual amount I get I cover with interest so basically no one else is subsidising my mortgage.

fliball123

leeroybrown wrote: »

I never argued that they were. The variable rate customers are paying for their own mortgages as far as I'm concerned. See my above post for a point about how 'technically' the tax payer is subsidising your mortgage but I've no major issue with this as it's based on a solid legal contract.

How is someone technically paying my mortgage when I am paying back the emount owed plus interest...

jimmycrackcorm

ei.sdraob wrote: »

Nver mind trackers

why are taxpayers subsidizing mortgage holders in general with reliefs and landlords with rent allowance?

Why did many mortgage holders have to subsidize taxpayers through paying stamp duty just to have somewhere to live?

sarumite

jimmycrackcorm wrote: »

Why did many mortgage holders have to subsidize taxpayers through paying stamp duty just to have somewhere to live?

You don't need to own the property to just to have somewhere to live. Anyway people are subsidizing the taxpayer on most of their purchases through VAT. Stamp duty can be viewed similarly to VAT imo.

prospect

Putting aside the obvious begrudgery on this topic,

Surely your anger should be directed to the people who caused this mess, rather than the people who were fortunate/lucky enough to insulate themselves from the heat of the fire.

The German and other international banks who lent to the Irish banks who were taking the p1ss.
The actual banks in Ireland who lent recklessly to punters (100%+ mortgages, come on, that was an obvious dumb idea from the outset).
And the individuals who would borrow any amount of money, regardless of their means and the banks conditions, just to own a house or own a house in a particular area or of a particular size.
The regulators who were to lenient on the banks and took their eye off the pitch (let alone the ball)

Reckless lending, reckless borrowing and a lack of regulation, there is the problem, not the people who made the right decisions.

ei.sdraob

jimmycrackcorm wrote: »

Why did many mortgage holders have to subsidize taxpayers through paying stamp duty just to have somewhere to live?

One wrong does not excuse another

Iwannahurl

The letter writer quoted by the OP (and possibly the OP also) may be angry at their situation and seeking a scapegoat or other target for blame.

We switched to a tracker several years ago when our LTV in a rising market made it sensible to do so. Should we have sat on our hands when the opportunity arose in case we might be accused of subsidising holders of variable rate mortgages at some unspecified time in the future?

AFAIK there are approximately 400,000 holders of tracker mortgages in Ireland. Like many if not most other people in that cohort, we are not part of the "ruling classes" or even the "comfortable middle classes". In early 2009 we lost one income, in addition to suffering several significant cuts in succession to our one remaining salary. We have been overdrawn twice this year already.

I feel sorry for people who are in negative equity and/or who are struggling to meet their repayments, but I'm not going to feel guilty. Why should I?

blorg

Plenty of people on tracker mortgages are also in negative equity, incidentally.

leeroybrown

dan_d wrote: »

No, we always had just a plain simple tracker.We were surprised too, to be honest, we rang them at the time and asked could we just leave our monthly repayments as they were and they said no.They said they'd had a lot of people calling about that. There wasn't really a solid reason for it. I suppose they were thinking about making money on the interest or something, I'm not entirely sure. We have saved a bit and paid a small bit in lump sums off it, but it would have been a hell of a lot easier to have just let us keep paying higher repayments every month.

Ah. Now I can see the exact issue you had. Most banks traditionally have had an awkward process for 'overpaying'. Generally its in the form of a lump sum payment made completely separately from the normal mortgage payments. Their IT systems probably wouldn't have been able to handle the concept of an overpayment without reducing the term of the mortgage.

leeroybrown

fliball123 wrote: »

But fundamentally that is wrong I get a loan of 100k and I pay back 108k I more than cover what I borrowed...Its not my fault how the banks structured this but the actual amount I get I cover with interest so basically no one else is subsidising my mortgage.

fliball123 wrote: »

How is someone technically paying my mortgage when I am paying back the emount owed plus interest...

I agree with you. I'm not accusing you and other tracker customers of being subsidised or anything like that. You've got a contract with the bank and both sides are honouring it.

What I was saying is that there is a 'technicality' involved whereby the only reason the bank is able to afford to lend the money to you is that the state is loaning (gifting) them funds that is being borrowed at a far higher rate than the ECB + 1% rate. The state is effectively subsidising the loss making loan within the bank but that's the bank and the states problem not yours. Its an academic/technical point rather than anything else.

jamesbrond

More bad news for the begrudgers.
I think it might be possible to hedge a tracker through spreadbetting. I read about it on askaboutmoney.com.

It should be possible via the same mechanism for hedging against currency fluctuations.

Looking around for a suitable product now, but i'll come back and let people know if i find one. If anyone else finds one let me know.

Basically you bet on the ECB interest rate to go up. You gear up to make sure you cover the same amount that you lose on your mortgage going up.
If the rate goes the opposite way your mortgage payments goes down, but you lose the money on the bet. So it balances out whichever way it goes.

It should be possible, since the tracker is tied tied the ECB rate, to always pay the same rate you are paying now, whether the ECB rate goes up or down. So the hunt is on to find a product tied to the ECB.

And please, before the begrudgers come back and say that a spread betting company would never take this bet, go away and find out how spreadbetting works first.

bunkbedman

Lol...as usual we fight amongst ourselves while the real enemy is forgotten.... some interesting points some accurate some off the radar....
I am a broker (boo hiss) and understand the anger those on variable rate mortgages are feeling, however incorrectly venting this at tracker holders is unwarranted.

Both need to understand the bankers in this country are all being bailed out to some extent, including PTSB who have the benefit of the deposit guarantee without which the flight of capital would have closed them first (due to their funding model).
Anyway not to overly elaborate I would ask you all to vent your anger and believe me you all will in time at the banks and the politicians who are allowing this to happen not at each other. Tracker mortgages are being scrutinised by the very best and highest legal minds with the very fabric of the various contracts being examined for any possible breakout clause so fingers crossed that this doesn’t end up in the courts because I firmly believe they just might cave in... The judiciary in this country has a poor record when the state is being challenged.
anyway good luck to anyone who is ahead and remember if you are struggling do not stay silent, don’t ignore the calls there are some rights there to protect you. If you feel unable or are confused etc remember you are entitled to a third party representative that includes taking those horrible and negotiating a reasonable solution to help you through.
We are working mostly now on schemes of arrangements with all the lenders as currently they have no desire to repossess (borne out by the extremely low numbers)

Finally two things to remember if all trackers were somehow removed in the morning what would happen? Yes the banks would immediately migrate them to their standard variable rates but there would be no drop in existing variable rates, they would just screw everybody. In any event watch savings rates and any other products supplied by banks will be squeezed or increased over the coming years insurance prices are skyrocketing again so invariably we will all suffer to some degree to repair the balance sheets of the banks (all the banks)Lastly trackers were used as a loss leader to get market share, and banks were willing to cut their own throat to get a bigger slice. Subsequently this is why PTSB is hurting most as their residential book holds the largest share of trackers and the worst deposit ratios. They are applying the harshest adjustments on variable rates and now not even offering fixed rates to existing customers, this is callous and should be remembered. The only reason they are afloat is they had no development finance book and have a highly profitable insurance division.

dan_d

In other words, the banks got greedy, f&*ked up, and now have to cover their losses somehow - so they're squeezing every penny they can out of their customers. Witness BOI charges being introduced, interest rate rises (and the only way they'll go is up) and whatever other inventive methods they can come up with to get money out of people.

ie...it goes WAY beyond tracker mortgages....

eamo12

Well, this issue came of on newstalk this morning. If I had a tracker, I'd be upset as well with the prospect of paying their fair share, but there is no doubt that tracker mortgages are being subsidised. The point was made that no contract stands in the case of a liquidation. If you think that the trackers mortgage would have been bundled up and sold to German investors, then you are mistaken - they wouldn't touch them even for a 90% discount.

The reason this issue has been kept under the radar is because there are twice as many tracker mortgages as variable rates, so they try to keep the issue quiet, or shout it down when it does come up. Burn the trackers. Good work to newstalk.

nice1franko

eamo12 wrote: »

Well, this issue came of on newstalk this morning. If I had a tracker, I'd be upset as well with the prospect of paying their fair share, but there is no doubt that tracker mortgages are being subsidised. The point was made that no contract stands in the case of a liquidation. If you think that the trackers mortgage would have been bundled up and sold to German investors, then you are mistaken - they wouldn't touch them even for a 90% discount.

The reason this issue has been kept under the radar is because there are twice as many tracker mortgages as variable rates, so they try to keep the issue quiet, or shout it down when it does come up. Burn the trackers. Good work to newstalk.

I don't even... what?

RichardAnd

nice1franko wrote: »

I don't even... what?

I've no idea what he's saying either