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

eamo12 · 23-03-2011 10:36AM #1

Interesting letter below to a Clare newspaper:

The ruling classes must all be on tracker mortgages, these subprime remnants of the Celtic tiger era because it's an issue that's rarely brought up in the media.

Why are variable rate mortgage holders left picking up the tab, a direct subsidy amounting to hundreds of Euro EVERY MONTH to tracker holders? It is a fact that variable rates are so high because tracker rates cannot be touched, so one must shoulder the burden for the other.

"It's in the contract" we are told and suddenly contracts become sacrosanct for tracker holders anyway and on that issue only. It is a fact that if our politicians had decided not to bail out the disastrous practices of the banks (like issuing trackers to the comfortable middle classes), then those tracker mortgages would not be allowed to enjoy this 'golden pension' subsidy i.e. the tracker mortgages would have been repackaged as variable rates to reflect the market rates (at least). What good is a tracker rate contract when your bank has gone bust, but WE bailed them out - notice how everyone has to shoulder the burden for that bailout.

It is nothing more than an immoral direct tax on the poor who got caught buying property at the top of the boom to fund the Celtic lifestyles of those who benefited the most out of the recklessness of the banks and politicians.

When I hear my tracker colleagues discussing holidays these days, I can't help thinking that if they paid me 3 or 4 hundred Euro NET extra a month, maybe I too could think about going on a holiday as well.

blorg · 23-03-2011 10:47AM

Because people on tracker mortgages took out a contract? I'm sure there would be a lot of tracker mortgage holders that would be quite happy to have their contracts voided, if this left them no longer owing the money.

Correct me if I am wrong but a bank going bust would not void a tracker mortgage contract so the bailout is irrelevant.

sarumite · 23-03-2011 10:50AM

eamo12 wrote: »

Interesting letter below to a Clare newspaper:

The ruling classes must all be on tracker mortgages, these subprime remnants of the Celtic tiger era because it's an issue that's rarely brought up in the media.

Why are variable rate mortgage holders left picking up the tab, a direct subsidy amounting to hundreds of Euro EVERY MONTH to tracker holders? It is a fact that variable rates are so high because tracker rates cannot be touched, so one must shoulder the burden for the other.

"It's in the contract" we are told and suddenly contracts become sacrosanct for tracker holders anyway and on that issue only. It is a fact that if our politicians had decided not to bail out the disastrous practices of the banks (like issuing trackers to the comfortable middle classes), then those tracker mortgages would not be allowed to enjoy this 'golden pension' subsidy i.e. the tracker mortgages would have been repackaged as variable rates to reflect the market rates (at least). What good is a tracker rate contract when your bank has gone bust, but WE bailed them out - notice how everyone has to shoulder the burden for that bailout.

It is nothing more than an immoral direct tax on the poor who got caught buying property at the top of the boom to fund the Celtic lifestyles of those who benefited the most out of the recklessness of the banks and politicians.

When I hear my tracker colleagues discussing holidays these days, I can't help thinking that if they paid me 3 or 4 hundred Euro NET extra a month, maybe I too could think about going on a holiday as well.

Unfortuantely I wasn't/am not in the financial position to buy a house so I don't fully understand the the in's and out's of tracker v's variable rate. My ignorance had me believing they were one of the same. Could you please clarify or direct me towards a link discussing what you are referring to?

danbohan · 23-03-2011 10:50AM

eamo12 wrote: »

Interesting letter below to a Clare newspaper:

The ruling classes must all be on tracker mortgages, these subprime remnants of the Celtic tiger era because it's an issue that's rarely brought up in the media.

Why are variable rate mortgage holders left picking up the tab, a direct subsidy amounting to hundreds of Euro EVERY MONTH to tracker holders? It is a fact that variable rates are so high because tracker rates cannot be touched, so one must shoulder the burden for the other.

"It's in the contract" we are told and suddenly contracts become sacrosanct for tracker holders anyway and on that issue only. It is a fact that if our politicians had decided not to bail out the disastrous practices of the banks (like issuing trackers to the comfortable middle classes), then those tracker mortgages would not be allowed to enjoy this 'golden pension' subsidy i.e. the tracker mortgages would have been repackaged as variable rates to reflect the market rates (at least). What good is a tracker rate contract when your bank has gone bust, but WE bailed them out - notice how everyone has to shoulder the burden for that bailout.

It is nothing more than an immoral direct tax on the poor who got caught buying property at the top of the boom to fund the Celtic lifestyles of those who benefited the most out of the recklessness of the banks and politicians.

When I hear my tracker colleagues discussing holidays these days, I can't help thinking that if they paid me 3 or 4 hundred Euro NET extra a month, maybe I too could think about going on a holiday as well.

you know i was just thinking the same thing myself and then i sat and thought about it and i realized that ..............

When I hear my tracker colleagues discussing holidays these days, I can't help thinking that i made a huge mistake in not getting a tracker myself and that i am really a begrudger in thinking that its unfair that my tracker owning friends might be better off now than i am , maybe I should stop blaming other people for my problems in not been able too afford a holiday and place the blame where it really belongs , with myself

Kurley · 23-03-2011 10:55AM

If trackers are killed en-masse then there would be a huge spike in defaults, requiring a larger sum to be pumped into the banks, increasing the size of the public debt and so on.

Everybody would lose out. Note, I do not have a tracker and wish I had.

sollar · 23-03-2011 11:04AM

Variable customers are suffering interest rate rises to cover the losses that trackers represent for the banks. Both variable and tracker customers are in trouble but the tracker customers are being protected by these new initaitives. Thats hardly fair.

If someone can't service their tracker fully then they should be lumped in with all other mortgage strugglers and a plan made to deal with them all together imo.

fliball123 · 23-03-2011 11:09AM

eamo12 wrote: »

Interesting letter below to a Clare newspaper:

The ruling classes must all be on tracker mortgages, these subprime remnants of the Celtic tiger era because it's an issue that's rarely brought up in the media.

Why are variable rate mortgage holders left picking up the tab, a direct subsidy amounting to hundreds of Euro EVERY MONTH to tracker holders? It is a fact that variable rates are so high because tracker rates cannot be touched, so one must shoulder the burden for the other.

"It's in the contract" we are told and suddenly contracts become sacrosanct for tracker holders anyway and on that issue only. It is a fact that if our politicians had decided not to bail out the disastrous practices of the banks (like issuing trackers to the comfortable middle classes), then those tracker mortgages would not be allowed to enjoy this 'golden pension' subsidy i.e. the tracker mortgages would have been repackaged as variable rates to reflect the market rates (at least). What good is a tracker rate contract when your bank has gone bust, but WE bailed them out - notice how everyone has to shoulder the burden for that bailout.

It is nothing more than an immoral direct tax on the poor who got caught buying property at the top of the boom to fund the Celtic lifestyles of those who benefited the most out of the recklessness of the banks and politicians.

When I hear my tracker colleagues discussing holidays these days, I can't help thinking that if they paid me 3 or 4 hundred Euro NET extra a month, maybe I too could think about going on a holiday as well.

Lets get one thing straight tracker mortgage holders are paying back the money they borrowed with interest and are at the mercy of the ECB changes in interest rates...So how are people on normal variable rates subsidising these people?? as far as I am aware anyone paying back a tracker mortgage will pay back the full amount + the interest rate set by the ECB + an extra 1 or 2 % on top..

Direct your anger at the banks not people who are paying for what they borrowed and then some

andrewdeerpark · 23-03-2011 11:15AM

People what part of a free market economy society do you not understand?

Trackers were a great deal at the time available to all frugal people (the ones without property portfolios, massive houses and big jeeps rolled into a stupid size mortgage). You do not do the paperwork or qualify and sign up, your tough luck. I have no interest in paying for others financial delinquency.

I am tired of this bailout culture that has come from the top down, everyone wants assistance now: we either have capitalism or communism.

Cool Mo D · 23-03-2011 11:16AM

fliball123 wrote: »

Lets get one thing straight tracker mortgage holders are paying back the money they borrowed with interest and are at the mercy of the ECB changes in interest rates...So how are people on normal variable rates subsidising these people?? as far as I am aware anyone paying back a tracker mortgage will pay back the full amount + the interest rate set by the ECB + an extra 1 or 2 % on top..

Direct your anger at the banks not people who are paying for what they borrowed and then some

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.

fliball123 · 23-03-2011 11:23AM

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.

Eh no the money they have borrowed in the mean time is at a higher rate...Your not seriously suggesting that a bank say aib gave say 100k mortgage to Job bloggs on a tracker of say +1% of ECB at the time. So are you saying they paid more for this 100k to the ECB..I dont think so..Get your knowledge straight the money borrowed for this money was at the ECB rate and a person on a tracker is paying a certain % higher which easily covers what was borrowed for their individual mortgage...so in fact the normal variable mortgage holders are paying for other areas such as money borrowed in between and of course bankers bonuses

andrewdeerpark · 23-03-2011 11:24AM

Remember Endowment Mortgages (more popular in England)

http://news.bbc.co.uk/2/hi/business/404872.stm

Well in that case the punter lost out, this time its the shoe on the other foot. So tough luck on the banks. Period.

Cool Mo D · 23-03-2011 11:27AM

fliball123 wrote: »

Eh no the money they have borrowed in the mean time is at a higher rate...Your not seriously suggesting that a bank say aib gave say 100k mortgage to Job bloggs on a tracker of say +1% of ECB at the time. So are you saying they paid more for this 100k to the ECB..I dont think so..Get your knowledge straight the money borrowed for this money was at the ECB rate and a person on a tracker is paying a certain % higher which easily covers what was borrowed for their individual mortgage...so in fact the normal variable mortgage holders are paying for other areas such as money borrowed in between and of course bankers bonuses

When the bank borrows money to get you a mortgage, they don't borrow it all in one go for 30 years. Banks have to constantly roll over some of their debt with new debt.

Kurley · 23-03-2011 11:31AM

There are lots of people in this country that are in an awful position because they borrowed unwisely. They are stuck with their debts. Conversely there are those that are ok or even doing very well as they borrowed wisely and were able to get a tracker mortgage. You can say the banks lent in this case unwisely but that should be their loss and not the borrowers.

It would be deeply unfair to penalise those on trackers for the poor choices of others.

fliball123 · 23-03-2011 11:34AM

Cool Mo D wrote: »

When the bank borrows money to get you a mortgage, they don't borrow it all in one go for 30 years. Banks have to constantly roll over some of their debt with new debt.

Yes but the tracker is tracked to the ECB rate...So say that 100k is split into 10 years 10k a year..if ECB is 1% then the tracker mortgage holder pays back the amount with the 1% interest + the additoin 1% on top and if the ECB rate goes up so does the amount that the tracker mortgage holder pays..So regardless of what the bank does the tracker mortgage holder is paying for what they borrowed plus some

BaZmO* · 23-03-2011 11:35AM

sollar wrote: »

Variable customers are suffering interest rate rises to cover the losses that trackers represent for the banks. Both variable and tracker customers are in trouble but the tracker customers are being protected by these new initaitives. Thats hardly fair.

What new initiatives?

sollar wrote: »

If someone can't service their tracker fully then they should be lumped in with all other mortgage strugglers and a plan made to deal with them all together imo.

A tracker mortgage is just like any contract, if either side break the contract there are penalties, or am I missing something?

andrewdeerpark wrote: »

I am tired of this bailout culture that has come from the top down, everyone wants assistance now: we either have capitalism or communism.

Yeah but the problem at the moment is that we seem to have Capitalism for the poor and Communism for the rich.

EoghanConway · 23-03-2011 11:37AM

sollar wrote: »

Variable customers are suffering interest rate rises to cover the losses that trackers represent for the banks.

And losses due to mismanagement, waste, flight of deposits etc etc.

sollar wrote: »

Both variable and tracker customers are in trouble but the tracker customers are being protected by these new initaitives. Thats hardly fair.

Contract law is not new. Variable customers are also protected by their contract, it's just that right now the variable rate is not as good. It is entirely possible but admittedly unlikely that the ECB could raise it's rate to 10% and the banks could set variable rates to, say, 7% thus variable would be better than tracker.

sollar wrote: »

If someone can't service their tracker fully then they should be lumped in with all other mortgage strugglers and a plan made to deal with them all together imo.

They are. The banks are only too happy to try to push people off tracker mortgages via restructuring whenever the opportunity arises.

eamo12 · 23-03-2011 11:53AM

andrewdeerpark wrote: »

People what part of a free market economy society do you not understand?

Trackers were a great deal at the time available to all frugal people (the ones without property portfolios, massive houses and big jeeps rolled into a stupid size mortgage). You do not do the paperwork or qualify and sign up, your tough luck. I have no interest in paying for others financial delinquency.

I am tired of this bailout culture that has come from the top down, everyone wants assistance now: we either have capitalism or communism.

Ah, that's the point though - if capitalism were allowed to run it's course, then the banks that would have gone bust. What would have happened to the tracker mortgages then do you think? Extremely doubtful that they would stay at the low rate they are now, contract or no contract.

So it's the tracker mortgage holders that are getting the handout. The point is why should variable rate mortgage subsidize this handout??

sollar · 23-03-2011 11:57AM

BaZmO* wrote: »

A tracker mortgage is just like any contract, if either side break the contract there are penalties, or am I missing something?

And if they can't service their tracker and the bank is losing on it, the bank should throw them of it onto a variable.

ei.sdraob · 23-03-2011 12:02PM

Nver mind trackers

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

blorg · 23-03-2011 12:04PM

eamo12 wrote: »

Ah, that's the point though - if capitalism were allowed to run it's course, then the banks that would have gone bust. What would have happened to the tracker mortgages then do you think? Extremely doubtful that they would stay at the low rate they are now, contract or no contract.

Explain the mechanism by which when a bank goes bust mortgage holders have their contracts voided. AFAIK the debts would simply be sold to a new institution (at a discount if they were now unprofitable) and the T&Cs maintained.

What is the difference, in your mind, between a bank changing people (who are keeping up their contracted payments) off a tracker, and the debtor simply deciding they don't want to pay the money back any more?

BaZmO* · 23-03-2011 12:07PM

sollar wrote: »

And if they can't service their tracker and the bank is losing on it, the bank should throw them of it onto a variable.

They do

andrewdeerpark · 23-03-2011 12:07PM

eamo12 wrote: »

Ah, that's the point though - if capitalism were allowed to run it's course, then the banks that would have gone bust. What would have happened to the tracker mortgages then do you think? Extremely doubtful that they would stay at the low rate they are now, contract or no contract.

So it's the tracker mortgage holders that are getting the handout. The point is why should variable rate mortgage subsidize this handout??

Wrong, with a failed out bank selling off its loan book it would have to honour the loan contract whether variable or tracker.

I am all for letting banks fail but your analysis is incorrect.

seamus · 23-03-2011 12:08PM

Tracker mortgages are getting specific protection because banks have been using their size/weight to bully customers into removing the tracker rate. They rely on customers' ignorance and apathy and tell them that, "This is what's happening, screw you", when the customer has a legal contract which prevents the bank from making these changes.
The government are simply trying to protect people's legal rights.

In addition to that, removal of tracker rates will see a mass default.

Basically here's the scenario; A supplier supplies goods to customer A at an agreed rate, which is beneficial to the supplier at the time.
But the cost of the goods has increased massively so the supplier must increase the cost of the goods that he's supplying to customer B in order to make up the loss that he's making on customer A.
It's not customer A's problem that the company is undercharging him, it's the company's problem. Their poor foresight has led to them selling goods at a loss.

Of course the contract with customer A can be cancelled, but they would have to either forgoe the value of goods already supplied or pay the customer a hefty get-out penalty to move them onto a less beneficial contract.

In a banking context, if tracker mortgages are unsustainable, the banks will either have to write off these mortgages or offer the customers money to come off a tracker rate.

It's free market economics. There are plenty of people who aren't "middle class fatcats" who are on tracker mortgages and relying on that stability to keep food their bellies.

In reality, the banks only started removing tracker rates after the start of the crash and they were offering tracker rates well past Autumn 2006 (which was the peak), so anyone who didn't get a tracker rate at the top of the boom has only themselves to look at.

Sponge Bob · 23-03-2011 12:19PM

eamo12 wrote: »

( Posted by Eamo not written by Eamo, the comment below is aimed at the original letter writer)

"Why are variable rate mortgage holders left picking up the tab, a direct subsidy amounting to hundreds of Euro EVERY MONTH to tracker holders? "

Because you were TOO STUPID to change to a tracker when you could...between 2004 and 2008 or so. Most variable rate mortgagees evidently did.

Godge · 23-03-2011 12:23PM

Irish begrudgers never go away. People make decisions and take risks and should live with them.

Tracker mortgages are a good deal now and well done to those who availed of them. However, they are not without risk. In the unlikely (but not impossible) event that we endure a period of hyperinflation sometime over the next ten years, and the ECB raises rates to extremely high levels, those on tracker mortgages will see big increases in costs. In the same way that not all reductions are passed on the variable mortgages, it is possible that some of the temporary large increases in such a case would not be passed on by banks to variable mortgages. In such a scenario the tracker mortgage holder would be doing less well vis-a-vis a variable mortgage holder. Will all the variable mortgage holders who are crying and wailing now be willing to subsidies the tracker mortgage holders then? and don't forget, fixed mortgage holders will be doing best of all then.

I think not. If life is to be fair, you should reap what you sow. At the moment that means a good crop if you are a tracker mortgage holder. Won't always be the case. The trick is to pay off your debt while you are on a relatively good interest rate.

Xcellor · 23-03-2011 12:25PM

Thanks to my wife we changed to tracker mortgage. ECB+1.25%.

At one stage we were paying more than standard variable. Then the sh1t hit the fan and instead of getting letters saying the rate had increased now it was dropping. As a result now making overpayments to mortgage for the last year.

Not going on foreign holidays though.

Guy:Incognito · 23-03-2011 12:27PM

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.

If interest rates shot up to 15-16% like in the 80's should the banks let the people away with the difference between what the banks pay in interest on the mony borrowed and what the people are paying back or does it only work when it's low and other people are jealous?

BostonB · 23-03-2011 12:31PM

Godge wrote: »

...People make decisions and take risks and should live with them....

The trick is to pay off your debt while you are on a relatively good interest rate.

IMO, anyone on a variable, needs to accept they've made a mistake, and learn from it.
The best option is to pay it off as soon as possible. As you'll pay less interest.

leeroybrown · 23-03-2011 12:32PM

I love the fact that people are lambasting others for having made a good financial choice where for once the banks aren't the ones screwing them. The OP and anyone else who moans about tracker mortgages is just a bitter begrudger because that they didn't have the foresight to switch to one when it was the smart financial choice. Boo hoo...

Welease · 23-03-2011 12:33PM

seamus wrote: »

In reality, the banks only started removing tracker rates after the start of the crash and they were offering tracker rates well past Autumn 2006 (which was the peak), so anyone who didn't get a tracker rate at the top of the boom has only themselves to look at.

Agreed.
We picked up a tracker in Dec 2007 from AIB, which was well into the housing slide..

eamo12 · 23-03-2011 12:39PM

Sponge Bob wrote: »

Because you were TOO STUPID to change to a tracker when you could...between 2004 and 2008 or so. Most variable rate mortgagees evidently did.

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:

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

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