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

seamus

robd wrote: »

I wouldn't like to definitively call it, but do I believe their is a strong risk that tracker mortgages could be legislated away via some emergency bill.

Not without undermining the entire basis of contract law and possibly even the constitution.

You cannot enact laws to retrospectively rewrite contracts.

One possibility is a hardship fund of sorts which allows banks to borrow cash at a zero rate from the government, specifically to buy people out of their tracker mortgages. That is, if a lender is losing money on a tracker, they can offer the borrower €80k to switch to a variable rate in the expectation that this new rate will bring in €160,000 over the life of the mortgage, net profit to the bank is €80k.

Figures are for illustration obviously. There would be all sorts of financial trickery taking place (not to mention that the €80k written off the mortgage never needs to exist in any tangible form).

EoghanConway

seamus wrote: »

You cannot enact laws to retrospectively rewrite contracts.

I can think of at least one occasion where this has happened. I don't believe there is any reference to contracts in the constitution.

seamus

EoghanConway wrote: »

I can think of at least one occasion where this has happened. I don't believe there is any reference to contracts in the constitution.

Can you cite such occasion?
No, there's no reference to contracts in the constitution, there is a reference to retrospectivity though;

5. 1° The Oireachtas shall not declare acts to be infringements of the law which were not so at the date of their commission.

I'm no constitutional lawyer though, hence why I said, "Possibly" the constitution.

bamboozle

halkar wrote: »

I think it will be very long time before Ecb rate + trackers to reach to current fixed and variable rates out there. With Portugal in the basket now and possibly Spain following for bailouts and Greece probably defaulting. It also depends on US data. I don't see the rates will go up much in near future while US has almost 0 %.
ECB will probably increase by .25% and will stay static for rest of the year (possibly next year too).

God, I love my tracker:D
Sorry

i hope you're right, i've been told that the ECB rate will rise a few times this year to counter inflation in Germany and to a lesser extent in France, the tragedy in Japan has delayed this somehow but my fear is between 2-4 rate rises in the next 12 months...i hope i'm 100% wrong though!

EoghanConway

seamus wrote: »

Can you cite such occasion?

I'll try, just when I'm not so busy

Got it: http://www.finance.gov.ie/documents/publications/other/2010/faqpaycutspubser.pdf Point 16

Jaysoose

seamus wrote: »

Not without undermining the entire basis of contract law and possibly even the constitution.

You cannot enact laws to retrospectively rewrite contracts.

One possibility is a hardship fund of sorts which allows banks to borrow cash at a zero rate from the government, specifically to buy people out of their tracker mortgages. That is, if a lender is losing money on a tracker, they can offer the borrower €80k to switch to a variable rate in the expectation that this new rate will bring in €160,000 over the life of the mortgage, net profit to the bank is €80k.

Figures are for illustration obviously. There would be all sorts of financial trickery taking place (not to mention that the €80k written off the mortgage never needs to exist in any tangible form).

I think anybody accepting a proposal from any irish bank to move off a tracker needs to go back to and redo primary school maths.

steve9859

halkar wrote: »

I think it will be very long time before Ecb rate + trackers to reach to current fixed and variable rates out there. With Portugal in the basket now and possibly Spain following for bailouts and Greece probably defaulting. It also depends on US data. I don't see the rates will go up much in near future while US has almost 0 %.
ECB will probably increase by .25% and will stay static for rest of the year (possibly next year too).

God, I love my tracker:D
Sorry

I would love that to be true, and it would in theory be the right thing for the ECB to do.

But the ECB's stated priority is to manage inflation, almost at the expense of all else, and certainly irrespective of US rates. If inflation in Germany looks like spiking, rates will go up irrespective of impact on peripheral countries. The Japan situation only delayed the inevitable by a short time, and I suspect that the ECB only delayed the rise due to pressure from other monetary authorities around the world

galway2007

Cool Mo D wrote: »

Tracker mortgages are subsidised because the interest rates they are paying on their debt is lower than the interest rates the bank paid to borrow that money on their behalf, so that banks are making a loss on tracker mortgages.

Therefore, banks are increasing their variable mortgage interest rates to claw back some of the money they are losing on the trackers.

well i have a tracker and it is subsidised by the queen thanks to ulster bank

robd

EoghanConway wrote: »

I'll try, just when I'm not so busy

Got it: http://www.finance.gov.ie/documents/publications/other/2010/faqpaycutspubser.pdf Point 16

Thanks for digging that up. So certain terms of a contract have been voided before so definitely do-able again. No constitutional problem.

Seamus,

Remember what I said. There is a risk of this happening. I didn't say it was a certainty. All I'm saying is that if I had a tracker, I would make provisions to cover this eventuality, rather than counting my chickens.

halkar

steve9859 wrote: »

I would love that to be true, and it would in theory be the right thing for the ECB to do.

But the ECB's stated priority is to manage inflation, almost at the expense of all else, and certainly irrespective of US rates. If inflation in Germany looks like spiking, rates will go up irrespective of impact on peripheral countries. The Japan situation only delayed the inevitable by a short time, and I suspect that the ECB only delayed the rise due to pressure from other monetary authorities around the world

German inflation was at 2.8% back in October 2008. Ecb rate was cut to 3.75 % that month. Oil was around 70$ and still going down. Dollar to Euro was at average 1.32 at the same time.

If we look at the data for today. German inflation is at 2.1% . Ecb rate is at 1% . Oil above 100$ and Dollar to Euro is over 1.40. Today's argument is inflation is being pushed up due high cost of energy prices and ME problems bla bla (they dont say they taxed the a$$ of petrol:D). Inflation was higher while energy prices were almost half of today back in 2008. I am no economist but numbers doesn't add up here.

Increasing interest rate will probably push Euro further against dollar and hurt Germany's exports as well as other eurozone countries. They can then say good bye to German growth. I don't think that is what the zee Germans want

I think central banks all over the world now trapped and we will see low interest rates for a long time.

bamboozle

halkar wrote: »

German inflation was at 2.8% back in October 2008. Ecb rate was cut to 3.75 % that month. Oil was around 70$ and still going down. Dollar to Euro was at average 1.32 at the same time.

If we look at the data for today. German inflation is at 2.1% . Ecb rate is at 1% . Oil above 100$ and Dollar to Euro is over 1.40. Today's argument is inflation is being pushed up due high cost of energy prices and ME problems bla bla (they dont say they taxed the a$$ of petrol:D). Inflation was higher while energy prices were almost half of today back in 2008. I am no economist but numbers doesn't add up here.

Increasing interest rate will probably push Euro further against dollar and hurt Germany's exports as well as other eurozone countries. They can then say good bye to German growth. I don't think that is what the zee Germans want

I think central banks all over the world now trapped and we will see low interest rates for a long time.

i hope you're right, i'm getting fond of my tracker!

robd

halkar wrote: »

German inflation was at 2.8% back in October 2008. Ecb rate was cut to 3.75 % that month. Oil was around 70$ and still going down. Dollar to Euro was at average 1.32 at the same time.

If we look at the data for today. German inflation is at 2.1% . Ecb rate is at 1% . Oil above 100$ and Dollar to Euro is over 1.40. Today's argument is inflation is being pushed up due high cost of energy prices and ME problems bla bla (they dont say they taxed the a$$ of petrol:D). Inflation was higher while energy prices were almost half of today back in 2008. I am no economist but numbers doesn't add up here.

Increasing interest rate will probably push Euro further against dollar and hurt Germany's exports as well as other eurozone countries. They can then say good bye to German growth. I don't think that is what the zee Germans want

I think central banks all over the world now trapped and we will see low interest rates for a long time.

The dollar is fc$ked. They are the most indebted nation in the word and the only two things propping it are the chinese having to buys its bonds to prop up their own exports and its status as reserve currency which means commodities are priced in it.

All remedies are just a case of kicking the can down the road. They've just become involved in a 3rd war (Libya) which is massively inflationary. Everyone knows this but to date is trying to convince themselves that it's different this time. So it's extremely dangerous to try to take it that the ECB rate will be set based on the dollar exchange rate. The dollar is going to hit 2:1 against the Euro in the next few years. It would be there today, except for probes with the PIIGS.

Also oil prices are only going one way. Peak oil production has been reached. That's not to say we're about to run out, but there have been no significant new finds for 40 years and we basically can't product any more of it. Oil prices are the biggest contributor to inflation.

Once central bankers accept all this and cough up to the fact that GDP growth figures have been massively manipulated to be higher in both the EU and US, combined with inflation CPI that's been stated as too low, the rates have to return to normal and higher to wean us off the credit binge. You can't back up a debt bubble with more debt for ever basically. Fundamentals come to play eventually.

seamus

EoghanConway wrote: »

I'll try, just when I'm not so busy

Got it: http://www.finance.gov.ie/documents/publications/other/2010/faqpaycutspubser.pdf Point 16

robd wrote: »

Thanks for digging that up. So certain terms of a contract have been voided before so definitely do-able again. No constitutional problem.

They're very different scenarios though. Not least because the pay of a civil servant is a contract between the Government and that person, and there are other agreements interfering with that like trade union mandates and so forth. It's a tangled mess.

In the case of tracker mortgages it's a simple contract between two private entities (it's irrelevant that the entites may now be government-controlled).

While at a glance it does appear that contracts have been superseded by law, in reality it's not that simple. Employment law already theoretically gives an employer the right to cut pay without consultation with the employee.

Indeed, just because something is contained in law, doesn't make it lawful. That is, just because no civil servants challenged their pay cut, doesn't mean that it was legally sound.

In the case of tracker mortgages, people would be less willing to shut up and take it and any attempt to legally supersede the contract would result in court cases at least, but I suspect it would be enough to collapse a government given the numbers involved.

Remember what I said. There is a risk of this happening. I didn't say it was a certainty. All I'm saying is that if I had a tracker, I would make provisions to cover this eventuality, rather than counting my chickens.

It would be folly for me to claim that it's an impossibility. However I do consider it a pipe dream of the disgruntled. If SF were in power, then it would be a little more likely. But as it stands it wouldn't make economic or political sense to legally attempt to invalidate tracker mortgages.

Pull the tracker pillar out tomorrow and the 23 billion they're talking about sinking into the banks today will seem like small change when tracker mortgage holders with billions worth of debt all go into default effectively overnight.

I personally could manage if my tracker was taken away, but I'm willing to bet that many, many others couldn't.

carpediem

Hi All:

Whilst having a tracker mortgage (ECB rate: 1% + your bank's agreed interest rate) is currently favourable over the average variable or fixed rates on offer at present, we must not forget to look at the bigger picture.

For example, in my own situation, I purchased my home in 2006 and have a tracker mortgage. The ECB interest rates increased 7 times in a 2 year period before decreasing as follows:

Increases:

• June 2006: + 0.25%
• Sept 2006: + 0.25%
• Nov 2006: + 0.25%
• Jan 2007: + 0.25%
• Apr 2007: + 0.25%
• July 2007: + 0.25%
• Aug 2008: + 0.25%

Decreases:
Nov 2008: - 0.5%
Dec 2008: - 0.75%
Feb 2009: - 0.5%
Apr 2009: - 0.25%
May 2009: - 0.25%
June 2009: - 0.25%

The net result is that I am now saving a mere €25 per month in interest. Keep in mind as interest rates decrease, so too will TRS (Tax Relief at Source).

In summary, many tracker holders may be better off than non-tracker holders at present, however, the difference may only be marginal. it's not all glee right now for all tracker holders; one must take into consideration the date of purchase of the home and the ECB rates at that time together with the interest rate changes.

I understand that variable rate mortgage holders have endured many rate increases recently, however, it all depends on how long they have had a mortage (start date to present). Otherwise, looking only at the current low ECB tracker rates is a mere snapshot in time and doesn't tell the full story.

Cheers!

robd

seamus wrote: »

It would be folly for me to claim that it's an impossibility. However I do consider it a pipe dream of the disgruntled. If SF were in power, then it would be a little more likely. But as it stands it wouldn't make economic or political sense to legally attempt to invalidate tracker mortgages.

Pull the tracker pillar out tomorrow and the 23 billion they're talking about sinking into the banks today will seem like small change when tracker mortgage holders with billions worth of debt all go into default effectively overnight.

I personally could manage if my tracker was taken away, but I'm willing to bet that many, many others couldn't.

Dammed if you do, dammed id you don't. It's certainly a tightrope walk with the holders on one side and the taxpayer on the other. You could always introduce a 'Tracker Mortgage Levy' of lets say for arguments sake 2%. Now where have I heard the word levy before. That wouldn't change the contract. This would be a government levy for the privilege of having one of these super duper mortgages which the government could put into a fund that the banks could claim for loses from.

Remember they're only an estimated 400,000 trackers. There's 4 million people in the country and about 1.8 million people working. It only affects a portion of people and it can always be blamed on FF, EU, IMF etc.

jjmcclure

robd wrote: »

Dammed if you do, dammed id you don't. It's certainly a tightrope walk with the holders on one side and the taxpayer on the other. You could always introduce a 'Tracker Mortgage Levy' of lets say for arguments sake 2%. Now where have I heard the word levy before. That wouldn't change the contract. This would be a government levy for the privilege of having one of these super duper mortgages which the government could put into a fund that the banks could claim for loses from.

Remember they're only an estimated 400,000 trackers. There's 4 million people in the country and about 1.8 million people working. It only affects a portion of people and it can always be blamed on FF, EU, IMF etc.

You can't put a levy on mine mate, I'm with BOSI and not covered by the Irish government, same applies to first active, ulsterbank etc.

Im afraid the begrudgers just need to get over it!!

robd

jjmcclure wrote: »

You can't put a levy on mine mate, I'm with BOSI and not covered by the Irish government, same applies to first active, ulsterbank etc.

Im afraid the begrudgers just need to get over it!!

Why? A mere stroke of a government pen. It would be anti-competitive to not make it available to all banks.

Ah, begrudger. That uniquely Irish word !!! Sure weren't all us sensible folks just begrudgers, sitting on the sides lines cribbing and moaning. Sure wouldn't we honestly live to see it as a missed opportunity

Seriously though. If you do keep them, fair play to you.

Maybe the effect of tracker mortgages is been overdone. I mean after all, if you want to fix or move house or top up your mortgage, then you have to surrender it. So that 400,000 could easily be 200,000 within 10 years. Also what about negative equity, can't the bank demand payment to cover loss, so that the LTV ratio is maintained.

D1stant

My insurance premium has gone up due to the amount of bust water pipes a few months back. I am now subsidising people with bad/no insulation. So all of their exposed copper piping should be ripped out and sold to the pikeys to compensate me!!

Is Ivan the OP?

seamus

robd wrote: »

Dammed if you do, dammed id you don't. It's certainly a tightrope walk with the holders on one side and the taxpayer on the other.

There are no "sides" here. Tracker holders are taxpayers too.

Sure weren't all us sensible folks just begrudgers

"Sensible folks"? The people paying extra to cover the trackers are those on standard variables, and they were far from sensible.

nice1franko

We should also:

• Target people who bought fixed-rate mortgages if their rate happens to be lower than the current one.
  
• Target people with banks who have lower annual fees
  
• Target people who visit the bank in person instead of online (which is obviously more cost effective). Why should we pay for these people to visit heated banks with carpets and what not - ALL ON OUR HARD EARNED??
  
• etc etc, childish rabble etc

I wonder would you be clamouring for the extra taxation if the ECB rate went the other way and higher than the Irish banks rate (see also, post by carpediem). Remember, both of these rates fluctuate and it could swing the other way yet.

You bought a bank product and you understood what it was. When the tracker product came out there were ads on tv and in papers for it and even Financial Regulator ran some fairly famous/infamous ads highlighting them. 400k people decided they'd rather be tied to the ECB rate instead of the rate of individual Irish banks.

jjmcclure

robd wrote: »

Why? A mere stroke of a government pen. It would be anti-competitive to not make it available to all banks.

Ah, begrudger. That uniquely Irish word !!! Sure weren't all us sensible folks just begrudgers, sitting on the sides lines cribbing and moaning. Sure wouldn't we honestly live to see it as a missed opportunity

Seriously though. If you do keep them, fair play to you.

Maybe the effect of tracker mortgages is been overdone. I mean after all, if you want to fix or move house or top up your mortgage, then you have to surrender it. So that 400,000 could easily be 200,000 within 10 years. Also what about negative equity, can't the bank demand payment to cover loss, so that the LTV ratio is maintained.

Think about it Robd. BOSI, Ulster etc = NOT AN IRISH BANK. Did not take money from the Irish tax payer. So Irish Govt has no say in their contracts/terms etc

BeardyFunzo

robd wrote: »

Dammed if you do, dammed id you don't. It's certainly a tightrope walk with the holders on one side and the taxpayer on the other. You could always introduce a 'Tracker Mortgage Levy' of lets say for arguments sake 2%. Now where have I heard the word levy before. That wouldn't change the contract. This would be a government levy for the privilege of having one of these super duper mortgages which the government could put into a fund that the banks could claim for loses from.

You are just robbing my idea from post #56!

jamesbrond

robd wrote: »

Dammed if you do, dammed id you don't. It's certainly a tightrope walk with the holders on one side and the taxpayer on the other. You could always introduce a 'Tracker Mortgage Levy' of lets say for arguments sake 2%. Now where have I heard the word levy before. That wouldn't change the contract. This would be a government levy for the privilege of having one of these super duper mortgages which the government could put into a fund that the banks could claim for loses from.

Remember they're only an estimated 400,000 trackers. There's 4 million people in the country and about 1.8 million people working. It only affects a portion of people and it can always be blamed on FF, EU, IMF etc.

So you are saying to tax the smart/lucky people ...... LOL

whackball

I am a 33 year old male, one income family with 2 young kids.

I have a good job that took many years of self education and working my way from company to company within my field and now have a decent job and pay (circa 45K, by no means exceptional). I work damn hard and long hours but I am not rich, nor a politician or a banker, and I have little savings due to having a family and home (my choice of course).

I have a tracker mortgage. I have this because I saved over many years and didn`t buy expensive cars or go on 2 or 3 holidays per year.

I bought my house but not with a 100% loan and I had savings I was eligible for a tracker and I took it. Why should I be penalised for been savvy with my money over the years prior to buying my home (which os probably in neg equity anyway at this stage).

lmaopml

whackball wrote: »

I am a 33 year old male, one income family with 2 young kids.

I have a good job that took many years of self education and working my way from company to company within my field and now have a decent job and pay (circa 45K, by no means exceptional). I work damn hard and long hours but I am not rich, nor a politician or a banker, and I have little savings due to having a family and home (my choice of course).

I have a tracker mortgage. I have this because I saved over many years and didn`t buy expensive cars or go on 2 or 3 holidays per year.

I bought my house but not with a 100% loan and I had savings I was eligible for a tracker and I took it. Why should I be penalised for been savvy with my money over the years prior to buying my home (which os probably in neg equity anyway at this stage).

Imo, you shouldn't be 'penalised', I think if anything we must encourage people to keep paying off as much of their capital debt as humanly possible in these times rather than push them against the wall and they end up defaulting...that would be the worst possible outcome.

I wasn't as 'savy' as yourself as regards choosing the tracker, I chose to 'fix' a number of years ago, sometimes to my benefit and sometimes to my loss...ce sera sera! I bought a shoebox size home, certainly not a 'celtic cub' or whatever the term was phrased by the great ginger one - aka D.McWilliams, for location 'way back' lol in 2002, and am determined to meet my repayments cause it's our family 'home' my two children and mine and my husbands. I fixed it, and remain fixed till mid 2012, and then I'm subject to whatever may come as regards interest rates.....

We've also taken 'massive' paycuts - mine was cut 30% since two years ago all told...

There have been two years of warning signals about this, those who chose a 'tracker' chose wisely - good on ye!

parsi

Cool,

So will all you variable folk who want to sting the Tracker guys also agree to pay us fixed-rate folks back ?

I'm on a fixed-rate that is higher than the variable rate about which folk are whinging. I took out this rate in full knowledge that I may be paying more but I wanted the safety net (I remember the days of 17% rates). If I look back over the life of my mortgage I've probably lost out but accept that as the premium that covered me if rates did balloon. I'm not looking for anyone to give me a repayment because it turned out as it did.

This is populist rubbish much like Enda's plan years ago to compensate eircom shareholders.

mirwillbeback

I don't know what a tracker mortgage is?

Merch

Floppybits wrote: »

So banks are loosing money on trackers so why don't they come up with some sort of offer to those people on trackers to get them off it? They could offer cash or a reduction in the amount of the mortgage or maybe offer people on trackers a special fixed rate mortgage for say 10 years if they agree to come off the trackers.

It seems to me that banks are just not doing enough and are just sitting back and taking the hand outs.

jjmcclure wrote: »

The banks are accepting proposals from people on Trackers to move away. BOSI have a back log in respect to this. I have a proposal with them at the moment.

Correct me if I'm wrong but interest rates moving up won't help the Irish banks as the will still be borrowing short term money to cover the tracker mortgages and therefore the interest rate they pay moves up also.

I read an article recently that said UK banks were offering their customers sizeable reductions in their balance to swap from tracker mortgages, obviously the amount would need to offset the incresed rates people might suffer, is that likely to be a thing here? or are the banks just holding off on that altogether here?

The banks? which ones?

Also, how would the ECB rate increasing benefit a bank, they'd still only get their .5 - 1.5% above the rate anyway?

hmmm

People on variable rates are not subsidising tracker mortgages, they are subsidising the incompetent government decision to guarantee bank debt. If the banks had been allowed go bust, the tracker mortgages would have remained as they are and the bondholders would have picked up the bill. As it is, the government stepped in and are now getting the variable rateholders to subsidise their life support for the banks.

Iago

eamo12 wrote: »

That maybe so, but that is not the point. Again, why should low tracker mortgage rates be allowed on banks that were bailed out and are now effectively state owned? If natural economics were applied, these banks would be bust and the mortgage rates would have to be normalized.

BTW, calling 200,000 variable mortgage "TOO STUPID to change to a tracker when you could" is unbecoming of an Civil Servant like you, Sponge bob :pac:

eamo12 wrote: »

Well, trackers pay €180 per 100K than variables at the moment which isn't slightly less by any means.

But the general response to this is tough, live with it. The fact is it's a massive difference some mortgage holders have to pay.

But, what would have happened IF the Govt did not bail out the banks? The tracker mortgage holders have had a contract, the bank is bust and probably some liquidator involved. Then what?

The liquidator could say the contract has to be honored, but to whom?? The whole banking system is insolvent, there is no one to take over the crazy loan. Anyone who would contemplate servicing the loan would demand it lower cost (but the bank has no assets after paying senior bond holders) or increasing the interest rate and nullify the contract.

Enter the Government who effectively honours the low interest rate by bailing out the banks and presto, the contract stands again because there is now someone to sue - yes, the taxpayer.

What no one here seems to get is that their tracker rates exist only because of a political decision, not because of some great foresight in the past.

eamo12 wrote: »

Thankfully, my mortgage is well paid off, but it's striking the attitude displayed by the 'haves' here. Variable rate mortgages (not fixed variable) will always be more than tracker rates which are effectively the type of sub-prime mortgages that got the world into this mess in the first place.

eamo12 wrote: »

I'll let you make those arguments - not the point I'm making. The government is responsible, not the markets, for the difference between tracker and variable rates. So, back to the original question, why should variable rate mortgage holders subsidize trackers? It's as if tracker mortgage lobby have a direct line to the finance dept.

I gave up here, there's so much wrong with pretty much every post that eamo12 makes on the subject that I don't know where to start.