AIB and PTSB should give steep discounts on trackers

It is reported in the media that AIB, PTSB and EBS are asking the government and the Troika to allow them to sell their cheap trackers to the Irish Bank Resolution Corporation.

They will be selling at a discount of at least 20% and probably a lot more to the IBRC. So why don't they give most of this discount to their customers.

How much would IBRC pay for the following?


The maximum they would pay would be €200k. So the banks should offer their customers a 25% discount before selling them off at a t 33% discount.

Brendan

Brendan Burgess said:

It is reported in the media that AIB, PTSB and EBS are asking the government and the Troika to allow them to sell their cheap trackers to the Irish Bank Resolution Corporation.

They will be selling at a discount of at least 20% and probably a lot more to the IBRC. So why don't they give most of this discount to their customers.

How much would IBRC pay for the following?

Mortgage|€300k
house value|€200k
Term remaining |20 years
Tracker rate|ecb + 0.5%

The maximum they would pay would be €200k. So the banks should offer their customers a 25% discount before selling them off at a t 33% discount.

Brendan

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Hi Brendan,
Have you heard anything more about this?

My wife and I have a tracker with TSB (2.25%).
About a year ago we took them up on their offer of a 10% discount for paying off 30K (They took 33K off the principal.)

Our outstanding balance is now 95K, but we have 97K in savings so are in a position to pay it off if we wanted.
We eventually want to move house and move back to Cork city where we grew up, but at the moment nothing is selling in our estate (We are in 3 bed semi in a satellite town around 10 minutes from Cork city)

So we could pay it off now and have no money to move which would then feel like we are trapped there.
Another option is to rent out our existing house and use the 97K to move back to the city but we would be saddled with 2 mortgages and the hassle of having tenants.

Would it be worth writing to TSB and offering them 95K less 25% to clear the mortgage?

Absolutely, worth trying, but I suspect that the Bank's are not yet in the mode of offering these kind of deals.
Above position was reported at the time, but within the industry there was no indication of any imminent positive response from the Govmt.
Bank of Scotland (AFAIK) are the only Bank currently active in agreeing to significant discounts in return for early loan repayments.
I'm sure AAM posters would be letting us know if similar deals were agreed with other institutions.

If PTSB know that you have savings of €97k vs a mortgage of €95k, I would be surprised if they would do a settlement. The only way at present IMO that they would do a settlement is if you are in difficulties, which I would guess that you are not.
I would wait and see what the future brings because the fact that they offered 10% discounts last year, seems to be the start of further discounts.
Again as 44brendan says, it is wrth trying but perhaps too early

Irish Independent has an article on this today. I can't post the link because I don't have enough posts. But basically it is saying that the Banks should give a 25% discount to Trackers.


While the Banks "should", what is the likelihood of this actually happening ?

As ever the assumptions are everything:
1) They are on a rate of ECB +1%
2) The person has a 20 year mortgage and will not pay it off sooner
3) Can be successfully persuaded to move to PTSB's uncompetitive variable rate for a full 20 years

Point 1 is fair enough for anyone with a decent tracker.

Point 3 is key, if you used AIB's standard variable rate of 3.04% as the alternative to a tracker, the 25% would drop to 12%.

Point 2 will also be important for many customers. Take someone with a good income and savings who can actually afford to pay off a lump sum, there's a good chance they could be in a position to move house (and therefore would not have continued with the tracker). If I were a bank, I would only offer the deal to people in 3/4 bedroom houses who are unlikely to move, I would not entertain the idea of offering it to someone with healthy finances living in an apartment who would be likely to trade up.

If I were a bank, I would only offer the deal to people in 3/4 bedroom houses who are unlikely to move, I would not entertain the idea of offering it to someone with healthy finances living in an apartment who would be likely to trade up.

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That is a very good point. The bank should try to work out the likelihood of the person wanting to or having to trade up.

Will the IBRC be as clever as this when it is valuing the trackers which it buys from PTSB and AIB? That is why I think it's in the banks' interest to offer some scheme now. I agree that 25% is too generous. 10% might be a bit too light. But the discount could be worked out on a case by case basis.

The problem for the banks is that the scheme is self-selecting. Someone who is going to stay in their three bedroom house for ever, won't bother with the discount. Those who are thinking of moving would grab it.

Further to the points made above some months ago, here is my scenario;
- 22 years remaining on tracker mortgage, house purchased 8 years ago
- PPR
- ECB + 0.9% with IIB
- Remaining Mortgage circa 400k
- House value circa 400k
- I will not be moving anytime soon.

I am in the fortunate position of being able to pay off a substantial amount of the remaining mortgage now. I am not inclined to do so, unless the Bank plays ball - should I craft a letter to them looking for a discount or am I better off waiting to see if they devise a scheme. Dont want to play my hand now if a scheme is likely in the near future?