Borrowers warned to reject €15,000 offer to quit trackers

BANKS desperate to clean up their balance sheets could soon start trying to tempt mortgage holders to go elsewhere by offering them up to €15,000 off their home loan.

But consumers have been advised not to touch these "break-deals" unless they are offered more money.

The Irish Brokers Association (IBA) said lenders were quietly trying to protect their capital by tempting borrowers to switch to other providers.

Paul Kinane of the IBA said lenders were particularly keen to get people to give up trackers, which are loss-making for them.

"Not only do many banks no longer want new customers, some don't even want their existing customers anymore," he said.

This situation could lead to a borrowers' market, in which mortgage holders will be able to negotiate lucrative deals with their banks in return for ending the relationship.

But Mr Kinane warned: "Consumers need to be extremely vigilant as experience would indicate that you get nothing for nothing as far as the banks are concerned."

He said that a homeowner with a €300,000 variable rate mortgage may be tempted by having 3pc to 5pc of this loan written off, which would amount to a discount of between €9,000 and €15,000.

The IBA said it believes tracker customers would need a break-deal offer above 25pc (€75,000 on a €300,000 mortgage) to make it worth their while. He said that customers who dealt directly with the banks could have significant pressure brought to bear on them to change their terms.

"We are urging mortgage holders not to feel pressured into changing their loan terms or switching to another provider. People should see this as an opportunity to perhaps secure a better deal in the market," Mr Kinane said.

Switch

He dismissed a recent offer from Bank of Scotland/Halifax of €1,000 to those who want to switch away from the bank as a "low ball offer".

The bank is closing and will no longer offer top-up loans, prompting it to advise customers with a valuable tracker to switch the entire home loan to another lender to avail of a top-up.

"It is likely to be the start of similar campaigns, particularly from those lenders keen to exit the Irish market.

The Consumers' Association has called on the Financial Regulator to carry out a probe of mortgage lenders to make sure they are not attempting to encourage homeowners to give up tracker mortgages.

The association's chairman, James Doorley, said lenders were under a statutory obligation, under the regulator's consumer protection code, to act in the best interests of customers. This meant that any attempt to incentivise customers to give up their tracker would be a breach of the code. Lenders are attempting to get people to give up their trackers when they get into arrears and need to restructure their mortgage.

A spokeswoman for the Financial Regulator has also said that lenders were required to act honestly and in the best interests of customers.

"Our firm view is that no bank should offer incentives for tracker mortgage customers to switch to less favourable options," she said.