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A question about mortgage interest.

  • 30-05-2011 7:17pm
    #1
    Doodee
    Registered Users Posts: 6,419 ✭✭✭


    Hi There,

    Asking this on behalf of my sister.

    She recently received a letter from the Bank. In the letter it was offering her a change of rate in her mortgage. Her current rate is an Existing Variable RATE PDH @ 3.45%.
    The new rate they are offering her is a Tracker VAR ECB+1.60% RIL>75% @ 2.85%.
    She is a little confused as she thought that the banks were not giving out Tracker mortgages any more, which is what it sounds like they are offering.
    Is it too good to be true? Would there be any hidden charges / things to worry about?

    She says that any help is appreciated!

    Thanks.


Comments

  • #2
    n900guy
    Registered Users Posts: 288 ✭✭n900guy


    Could be a few things:

    1. A sensible bank ensuring that the mortgage payer can make more affordable payments and not go bankrupt

    2. The value to loan ratio may be a lot better now if she's been paying off for a while, so it may have been an automatic option when she took out the mortgage. Usually, you get better rates with lower % loan to value.


  • #3
    noxqs
    Registered Users Posts: 413 ✭✭noxqs


    Being ever cynical I would read those terms very closely and compare to current mortgage terms.

    I have been reading lately that some mortgage terms were .. optimistic .. at best for the banks which means they need an escape clause (this was usually for trackers actually?) but depending on the terms of her current mortgage it could be it is counter to the banks interest over a longer term and offering a tracker now with an escape clause, say gap between ECB and LIBOR rate above 0.x% will allow them to jack up the interest or switch to a different product?

    If there is no catch, which should be looked into, it seems like a fantastic deal. Too good to be true, in fact.

    Note that gap between interbank funding rate and ECB rate is a common term, and for banks/building societies with anything but prime financials can be quite wide. I've seen the gap quoted at 0.25% which can be used on some contracts to switch from tracker to higher % mortage products. So be careful.


  • #4
    Doodee
    Registered Users Posts: 6,419 ✭✭✭Doodee


    noxqs wrote: »
    Being ever cynical I would read those terms very closely and compare to current mortgage terms.

    I have been reading lately that some mortgage terms were .. optimistic .. at best for the banks which means they need an escape clause (this was usually for trackers actually?) but depending on the terms of her current mortgage it could be it is counter to the banks interest over a longer term and offering a tracker now with an escape clause, say gap between ECB and LIBOR rate above 0.x% will allow them to jack up the interest or switch to a different product?

    If there is no catch, which should be looked into, it seems like a fantastic deal. Too good to be true, in fact.

    Note that gap between interbank funding rate and ECB rate is a common term, and for banks/building societies with anything but prime financials can be quite wide. I've seen the gap quoted at 0.25% which can be used on some contracts to switch from tracker to higher % mortage products. So be careful.

    Where would she find these terms?
    She said that there was nothing out of the ordinary in the Acknowledgement and Agreement section, only a caveat about moving from fixed rate to the selected rate and owing compensation. I know that she is not on a fixed rate so it shouldn't be a worry right?
    She was also saying that if the ECB rate is not available that they will charge her their variable rate, which is what she is on right now.


  • #5
    Senna
    Registered Users Posts: 8,800 ✭✭✭Senna


    Doodee wrote: »
    She was also saying that if the ECB rate is not available that they will charge her their variable rate, which is what she is on right now.

    Are banks writing in clauses should we leave the Euro??


  • #6
    StillWaters
    Closed Accounts Posts: 1,799 ✭✭✭StillWaters


    Are you absolutely sure she is not on a fixed rate? Many borrowers who came off trackers onto fixed rates are now being offered a tracker when their fixed rate expires as per their contract, although banks had to be forced by the Regulator in some cases.

    Its a no brainer for her - grab the tracker.


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