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

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Comments

  • #92
    average_runner
    Registered Users, Registered Users 2 Posts: 12,894 ✭✭✭✭average_runner


    Eamo;

    Am i right in saying that you want Banks in Ireland that got aid off the goverment to get rid of their Trackers.

    You do know that is just AIB and Bank of Ireland.
    PTSB didnt get a handout yet and Ulster and Bank of Scotland have nothing to do with the Goverment.

    So its a very small fraction of the 400,000 trackers you are after, in fact if those 2 banks did abolish them the gains would not be that great, unless they did the following:

    they moved everyone off the fixed rate,
    remove what ever free banking there is,
    Have a only one type of savings account
    remove all benefits from students etc,
    remove their discount on health care and car insurance etc


    is this what you want?


  • #93
    Godge
    Closed Accounts Posts: 21,727 ✭✭✭✭Godge


    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: »
    No Sponge bob, by ensuring the banks did not fail, the government caused the discrepancies that arose in the rates. Most ppl who took out variable rates did not know that the government decision would mean that they would effectively be subsiding tracker mortgages. As I said earlier, if the govt made a decision that resulted in tracker rates rising to 2% more than variable, then your tune would surely be different.

    Again, losing money because of a bad financial market decision is one thing, losing it because of government interference is another.


    Let me explain a few things to you. If that banks had gone bust nothing would have changed for the holders of tracker mortgages.

    Assume AIB went bust in 2008 and there was no bank guarantee. Assume it had a set of tracker mortgages to the value of €100m. The liquidator would sell this mortgage book to pay off the account holders and the bondholders. Are they worth €100m? No. What are they worth? More difficult to say.

    You need to look at a number of factors.
    - What is the expected default/bad debt rate? 1, 5 or 10%.
    - What way is the interest rate charged on the mortgages? ECB + 0.5, +1 or +1.5%? How much in each category?
    - How much return on investment do you want?

    Looking at those figures, another bank, say a stable German bank, might think, I can get cheap ECB money, I can work these mortgages, they might be worth €50m to me. So the German bank buys the mortgage book off the liquidator for €50m. All the people on tracker mortgages keep paying back the money on the same rate as they are contracted to do except that it is to the German bank and the German bank honours the contracts. That is how banking works at its simplest.

    So who loses out? The shareholders in AIB are wiped out. The subordinated bondholders are wiped out. The senior bondholders and anyone with over €100,000 on deposit in AIB takes a hit and doesn't get all of their money back.

    The net point to all of this is that nobody anywhere at any time is subsidising the holders of tracker mortgages. The people who were being subsidised were the senior bondholders and those holding over €100,000 on deposit. The shareholders and the subordinated bondholders were nearly wiped out but have been partially subsidised - AIB shares still have a little value and the subordinated bonds still have a little value in the market.

    The worst of all this is that it is too late to do anything about it. The bonds have mostly been refinanced by ECB money and anyone with any sense who has a large amount on deposit bought gold, moved around different banks with the most in any one bank at €100,000 which is the European minimum guarantee.

    This thread is really meaningless.


  • #94
    leeroybrown
    Closed Accounts Posts: 7,562 ✭✭✭leeroybrown


    eamo12 wrote: »
    So, a contract has no bearing (legal or otherwise) in circumstances where the banks are simply broke. But for govt interference, tracker rates would simply not stand.
    Quite frankly this is ridiculous. The legal contract that makes the mortgage payable by the holder is the same one that gives the holder the entitlement to the tracker rate. Based on your argument the mortgage would have to cease to exist and not be repaid. As I said earlier, what you're referring to here is effectively a collapse of the financial and legal system of the country. Facepalm!


  • #95
    Floppybits
    Registered Users, Registered Users 2 Posts: 8,119 ✭✭✭Floppybits


    packiec50 wrote: »
    I think the point Eamo is making (badly) is that the currently state-owned banks are trying to get back into profit, so they are raising the rates on all mortgages they can. (as well as increasing charges elsewhere etc.)

    They cannot raise the rates on a Tracker mortgage and so they are raising the rates extra on the variable mortgages to compensate for this.

    Well that is the banks fault and not the fault of anyone on a tracker mortgage. When the person the tracker mortgage took out that mortgage it was because it was the deal that the bank was offering at the time, that same person could have taken a variable or a fixed rate mortgage.

    Also between 2005 -2007 the tracker mortgage went up about 2%, it only started coming down the financial crisis hit the markets. This has nothing to do with the government here and controlled by the ECB. If I was a variable mortgage holder with an Irish bank bailed out by the state I would be getting on the TD's and asking them why are they not talking to the banks about this? After all isn't that what this directors appointed by the state to the banks boards are suppose to be doing.

    The OP's anger is pointed at the wrong people, take it to your TD.


  • #96
    eamo12
    Registered Users, Registered Users 2 Posts: 210 ✭✭eamo12


    Welease wrote: »
    And if Alien overlords took over earth last week a different set of rules would apply...

    BUT.. they didn't... and the banks WERE propped up by the government so the contracts DO have bearing!

    So what's your point?

    Of course your right. But it does put to bed the argument put forward by many on this thread that their trackers are based on some financial genius on their part. Also, your point proves that tracker mortgage holders rates are effectively a government subsidy paid for by variable rate holders. You might think this is great, not me.


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  • #97
    eamo12
    Registered Users, Registered Users 2 Posts: 210 ✭✭eamo12


    average_runner wrote: »
    Eamo;

    Am i right in saying that you want Banks in Ireland that got aid off the goverment to get rid of their Trackers.

    You do know that is just AIB and Bank of Ireland.
    PTSB didnt get a handout yet and Ulster and Bank of Scotland have nothing to do with the Goverment.

    So its a very small fraction of the 400,000 trackers you are after, in fact if those 2 banks did abolish them the gains would not be that great, unless they did the following:

    they moved everyone off the fixed rate,
    remove what ever free banking there is,
    Have a only one type of savings account
    remove all benefits from students etc,
    remove their discount on health care and car insurance etc


    is this what you want?

    Better to have one group paying the lions share then so the above 'penalties' wont be imposed on everyone?


  • #98
    BostonB
    Closed Accounts Posts: 18,053 ✭✭✭✭BostonB


    How is the disparity different before and after the bailout.

    You're in complete denial. Fingers in ear mode.


  • #99
    eamo12
    Registered Users, Registered Users 2 Posts: 210 ✭✭eamo12


    Godge wrote: »
    Assume AIB went bust in 2008 and there was no bank guarantee. Assume it had a set of tracker mortgages to the value of €100m. The liquidator would sell this mortgage book to pay off the account holders and the bondholders. Are they worth €100m? No. What are they worth? More difficult to say.

    You need to look at a number of factors.
    - What is the expected default/bad debt rate? 1, 5 or 10%.
    - What way is the interest rate charged on the mortgages? ECB + 0.5, +1 or +1.5%? How much in each category?
    - How much return on investment do you want?

    Looking at those figures, another bank, say a stable German bank, might think, I can get cheap ECB money, I can work these mortgages, they might be worth €50m to me. So the German bank buys the mortgage book off the liquidator for €50m. All the people on tracker mortgages keep paying back the money on the same rate as they are contracted to do except that it is to the German bank and the German bank honours the contracts. That is how banking works at its simplest.



    This thread is really meaningless.

    I doubt a German bank would buy 100 million worth of tracker mortgages for 50 million AND allow the holders to keep their cheap rate - they not that stupid.

    If that the case, why didn't they simply do this???? No argument from me there - if thats the way finance works. But, as you well know, that did not happen. The tax payer effectively bought the tracker mortgages (the bailout) for 100% of the book value and bailed out the tracker rates as well.


  • #100
    seamus
    Registered Users, Registered Users 2 Posts: 68,173 ✭✭✭✭seamus


    eamo12 wrote: »
    Exactly, my point. So, what if that entity is broke?? What happens then.
    If someone owes money to that entity, they are a debtor to that entity and therefore the entity is not legally broke. The entity is only "broke" when it declares bankruptcy. You're tying yourself up in knots here. A "broke" entity cannot have debtors. If I owe a company €2,000 and they subsequently go into liquidation and close down, then I either pay my debt to the liquidator or it gets written off.

    If the entity to which I owe my mortgage is legally broke and has been liquidated/wound up/whatever, then by definition my debt has been written off and I have no cause to sue.
    I doubt a German bank would buy 100 million worth of tracker mortgages for 50 million AND allow the holders to keep their cheap rate - they not that stupid.
    If it made financial sense to do so, I don't see why not. They would buy it at €50m with the expectation of getting a €60m return on the loan book.
    The tax payer effectively bought the tracker mortgages (the bailout) for 100% of the book value and bailed out the tracker rates as well.
    "Effectively". The taxpayer bought the entire loan book of the banks, incidentally of which domestic mortgages are only a tiny percentage. The bulk of the loan books are tied up in big loans to developers (afaik). I'm presuming you're going to move onto "bailing out the developers" and "Grrr NAMA" too?


  • #101
    eamo12
    Registered Users, Registered Users 2 Posts: 210 ✭✭eamo12


    BostonB wrote: »
    How is the disparity different before and after the bailout.

    You're in complete denial. Fingers in ear mode.

    There is a world of difference - before the bailout the disparity was due to FINANCIAL MARKETS. Thats simple finance - some got a better deal so good for them.

    The bailout allowed the government to guarantee the loans thereby allowing the tracker contracts to be honoured, which they could NOT have been if the banks were allowed to fail. I'm sorry if that's too difficult for you to understand.


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  • #102
    Idbatterim
    Registered Users, Registered Users 2 Posts: 18,449 ✭✭✭✭Idbatterim


    I cant believe that some banks only have a .75% margin over EBC rate, its just incredible, I do agree that its a bit ridiculous that the the variable and fixed rate holders are now going to be made pay. I read earlier that the banks cannot get out of the trackers offered. I think offering them as 30 or 40 years mortgages was crazy. Im sure they will learn from this mistake, the should have reviewed them maybe every 5 years.

    http://www.independent.ie/business/personal-finance/property-mortgages/tracker-holders-may-get-cash-incentive-to-pay-early-2590609.html


  • #103
    BostonB
    Closed Accounts Posts: 18,053 ✭✭✭✭BostonB


    eamo12 wrote: »
    There is a world of difference - before the bailout the disparity was due to FINANCIAL MARKETS....

    Stop right there.

    Finally you admit, before the bailout. The disparity exists.

    Therefore the bailout did not cause the disparity.


  • #104
    leeroybrown
    Closed Accounts Posts: 7,562 ✭✭✭leeroybrown


    eamo12 wrote: »
    I doubt a German bank would buy 100 million worth of tracker mortgages for 50 million AND allow the holders to keep their cheap rate - they not that stupid.
    It's not stupid. This is exactly what would happen. The purchasing bank would buy at a sufficient discount that the capital repayment would be a good investment despite the non performing loans. They'd honour the contracts and tracker rates exactly as before but make a profit because they paid less than the fully matured loan book is worth.
    eamo12 wrote: »
    If that the case, why didn't they simply do this???? No argument from me there - if thats the way finance works. But, as you well know, that did not happen. The tax payer effectively bought the tracker mortgages (the bailout) for 100% of the book value and bailed out the tracker rates as well.
    We couldn't do this. If one of our banks sells €1bn of 'assets' for €0.5bn they generate a €0.5bn liquidity hole in their balance sheet which needs to be filled from somewhere to meet the regulatory requirements to operate as a bank in the EU/Ireland. This is the entire basis of our banking crisis. In our case as assets are written down tax payers money (or the guarantee thereof) is required to prevent the banks from ceasing trading.


  • #105
    eamo12
    Registered Users, Registered Users 2 Posts: 210 ✭✭eamo12


    seamus wrote: »
    If someone owes money to that entity, they are a debtor to that entity and therefore the entity is not legally broke. The entity is only "broke" when it declares bankruptcy. You're tying yourself up in knots here. A "broke" entity cannot have debtors. If I owe a company €2,000 and they subsequently go into liquidation and close down, then I either pay my debt to the liquidator or it gets written off.

    If the entity to which I owe my mortgage is legally broke and has been liquidated/wound up/whatever, then by definition my debt has been written off and I have no cause to sue.

    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.


  • #106
    fliball123
    Registered Users, Registered Users 2 Posts: 7,615 ✭✭✭fliball123


    eamo12 wrote: »
    No, that's not the point I'm making. Your right about the banks raising variable to cover their ass from the toxic tracker rates they have to honour. My point, again, is that if the banks were let go (I'm not arguing one way or the other), there would be no one to sue for breach of contract because there would be no assets as the senior bondholders etc. get paid long before the mortgage assets are sold of.

    So, a contract has no bearing (legal or otherwise) in circumstances where the banks are simply broke. But for govt interference, tracker rates would simply not stand.

    Eamo these tracker mortgages and other mortgages would of been sold to another bank..This has been pointed out ot you again and agains and the contract would be sold as is.

    My tracker started with First Active which is no longer an active bank ....they got taken over by Ulster bank but my contract is now with a different bank but the terms of the contract had to be retained.


  • #107
    Sponge Bob
    Banned (with Prison Access) Posts: 25,234 ✭✭✭✭Sponge Bob


    Idbatterim wrote: »
    I cant believe that some banks only have a .75% margin over EBC rate, its just incredible,
    Some are as low as ECB+0.5%

    I know Eamo is doing well presenting his emm case because he just called ME a "Civil Servant" :D:D:D


  • #108
    leeroybrown
    Closed Accounts Posts: 7,562 ✭✭✭leeroybrown


    fliball123 wrote: »
    My tracker started with First Active which is no longer an active bank ....they got taken over by Ulster bank but my contract is now with a different bank but the terms of the contract had to be retained.
    Ulster securitised their entire mortgage book years ago for investment capital and were losing cash on most mortgages even if they were variable. They probably sold your mortgage (and many others) at a loss to write them off their books.


  • #109
    spank_inferno
    Closed Accounts Posts: 3,884 ✭✭✭spank_inferno


    Sponge Bob wrote: »
    Some are as low as ECB+0.5%

    Awww.... I'm with EBS from 2006 & I'm on ECB+1.1%

    I feel hard done by! :(

    Who can I complain to!


  • #110
    fliball123
    Registered Users, Registered Users 2 Posts: 7,615 ✭✭✭fliball123


    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.

    Hang on there Eamo...What ever any tracker mortgage holder got a loan of they are paying it back plus interest so they are paying back more than they borrowed...You are making it sound like we are not paying anything and that you the variable mortgage holder is paying my mortgage..I can tell you over 2k comes out of my wage a month to pay my fcuking mortgage and you dont pay any of it. If your being charged more by the bank then its the banks fault not the tracker mortgage...as a mortgage holder we are jumping the same hurdles and fences..sure the ECB rate is going to rocket up over the next 2 / 3 years and the tracker rate will go up...

    In simple maths

    I get a loan of 100k
    I pay it back over say 10 years
    interest rates at say 1% above the ECB..I am paying well back more than I borrowed no other person is paying this so HOW ARE YOU SUBSIDISING MY MORTGAGE


  • #111
    seamus
    Registered Users, Registered Users 2 Posts: 68,173 ✭✭✭✭seamus


    eamo12 wrote: »
    But the govt intervened to the effect that now we have one group (variable) effectively subsidizing another (trackers).
    Even if the Government hadn't intervened, people would still have their tracker mortgages because another institution bought the debt.

    You possibly have a valid point in that if the banks had been allowed to go to the wall, then those on variable mortgages would have had their debts moved to another institution who didn't need to increase their rates quite so much; a German bank or something. But if that had occurred, most banks EU-wide would have been in big trouble (having big debts/investments in irish banks) and would have squeezed their variable rate holders for more money anyway.

    But that's not the tracker holders' fault, it's the previous Government's.


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  • #112
    leeroybrown
    Closed Accounts Posts: 7,562 ✭✭✭leeroybrown


    I've just realised the true irony of this thread. The tracker mortgage holders are one of the few groups of 'ordinary bank customers' who because of a binding contract haven't haven't been totally screwed over at some stage because of the financial mess yet they're being vilified. Isn't it great when you're the bad guy just because you got treated as you should be...


  • #113
    Welease
    Registered Users, Registered Users 2 Posts: 3,834 ✭✭✭Welease


    Idbatterim wrote: »
    I cant believe that some banks only have a .75% margin over EBC ratel

    Even lower.. Mine from AIB is at .5% over ECB rates and we took ours out in Dec 2007.


  • #114
    seamus
    Registered Users, Registered Users 2 Posts: 68,173 ✭✭✭✭seamus


    Well that's the Irish begrudgery leeroy. We can never stand to see someone doing well, and if they are, it must be because they're somehow screwing me over.


  • #115
    andrewdeerpark
    Registered Users, Registered Users 2 Posts: 951 ✭✭✭andrewdeerpark


    ECB rate +0.6

    All I had to do was fill up a one page form and get a drive by valuation and post it to AIB Mortgage HQ.

    Took a 1/2 hour out of my life what a gain....


  • #116
    Welease
    Registered Users, Registered Users 2 Posts: 3,834 ✭✭✭Welease


    It probably a waste of time pointing this out to the OP, but the "Poor" are not paying for the bailouts of the banks via increased variable rates.. the "comfortable middle class" who he dislikes are the ones who are actually paying for the bailouts through their taxes.. The amount collected from the "poor" on variable mortgages on domestic properties wouldn't make a dent in the revenue required.


  • #117
    fliball123
    Registered Users, Registered Users 2 Posts: 7,615 ✭✭✭fliball123


    leeroybrown wrote: »
    Ulster securitised their entire mortgage book years ago for investment capital and were losing cash on most mortgages even if they were variable. They probably sold your mortgage (and many others) at a loss to write them off their books.

    yes but as pointed out if I get a tracker mortgage of say 100k and for ease of .5% above the tracker rate over 10 years. Say the ECB never rises during this period..

    So I am paying back 10k a year + 1.5% interest

    So
    year 1 I pay back 11.5k
    year 2 I pay back 11.35k
    year 3 I pay back 11.20k
    year 4 I pay back 11.05k
    year 5 I pay back 10.90k
    year 5 I pay back 10.75k
    year 5 I pay back 10.60k
    year 5 I pay back 10.45k
    year 5 I pay back 10.30k
    year 5 I pay back 10.15k

    So totalling that up I am paying back 108.850 Euros

    So how are the variable mortgage holder subsidising my mortgage when I am paying back more.


  • #118
    RichardAnd
    Registered Users, Registered Users 2 Posts: 4,121 ✭✭✭RichardAnd


    My knowledge of tracker mortgages vs variables is that both were available for a certain period and that the choice of which to take was down to the home home-owner.

    I'm unsure as to the advantage of either or just what they entail as I have little interest in taking out such huge loans anyway but I think it's a little brusque to say that variable rate holders are taking the hit for tracker rate holders.

    But hey, this is Ireland so let the begrudgery roll.


  • #119
    leeroybrown
    Closed Accounts Posts: 7,562 ✭✭✭leeroybrown


    fliball123 wrote: »
    I get a loan of 100k
    I pay it back over say 10 years
    interest rates at say 1% above the ECB..I am paying well back more than I borrowed no other person is paying this so HOW ARE YOU SUBSIDISING MY MORTGAGE
    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%.


  • #120
    ForestFire
    Registered Users, Registered Users 2 Posts: 3,030 ✭✭✭ForestFire


    eamo12,
    Had the government not propped up the banks the variable rate mortgages would have gone up anyway, and probable more. It has nothing to do with the government.

    If the banks went bust all mortgages would be sold to some other bank under the exact same terms, i.e. tracker fixed to the ECB and variable at the mercy of the bank. likelihood variable would still go up.

    If you take a variable, it is variable!!

    Should we take people off fixed rate too, when variable is higher. This has been happening for years.

    Should I demand a cheaper car loan today because my fried got a better deal last year.

    Again the government has not made anything worse for variable rate holders, they have proably improved it.


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  • #121
    leeroybrown
    Closed Accounts Posts: 7,562 ✭✭✭leeroybrown


    fliball123 wrote: »
    So how are the variable mortgage holder subsidising my mortgage when I am paying back more.
    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.


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