Should tracker mortgages be levied so that non-trackers don't subsidise them?

ClubMan

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While I think that variable (and fixed) rates still seem too high and should come down I still wonder if some sort of levy on cheap tracker customers should not also be part of the solution to the arrears/non sustainability problem? I could be totally wrong - but why not?
 
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This got lost within another thread. I have heard the point before, but I have not heard any argument to justify it.

Brendan
 
The thing about that is it would breach the terms of their mortgage contract. Then again there's no need to as all the banks have to do is take advantage of the terms of the contracts that most people on svr mortgages are on and go and get them for the money they're losing, easy isn't it seeing as it's something they can do.The banks make profit again and they're fattened up for sale so the state don't care either.
 
I actually suggested this to Michael Noonan about two years ago but I called it a type of BIK which was the the wrong term. My argument was that thousands are benefiting from what was in effect a mistake by the banks and because if this others are unfairly paying. This is a way of sharing the burden. Why should one cohort of society pay through the nose for a roof over their heads while others pay very little?

If the government levied it it would not be a breach of contract.

I just got the usual reply about it not being the role of the Govt to interfere in the market.
 
While I think that variable (and fixed) rates still seem too high and should come down I still wonder if some sort of levy on cheap tracker customers should not also be part of the solution to the arrears/non sustainability problem? I could be totally wrong - but why not?

When you say a "levy" are you talking about the imposition of some sort of a tax by the State? It would be really bizarre if people were now going to taxed for making (what turn out to be) good financial decisions!
 
Sarenco,

Can you explain what capital gains tax is, or tax on the net profit of businesses, or selling shares ?
 
Sarenco,

Can you explain what capital gains tax is, or tax on the net profit of businesses, or selling shares ?

Eh, they are taxes on capital gains and income. A borrower with a tracker mortgage has not made any capital gains or earned any income simply by borrowing money pursuant to a particular agreement.

No idea what point you are trying to make.
 
Ultimately we're paying for the mistakes made by the banks and I can imagine the reaction if the state tried this, I couldn't see a challenge in the courts failing as people would then be made pay for making what turned out to be a great financial decision. As I said earlier the banks behaved as they did because they could, if the state wanted to they could act but as they're trying to fatten them up for sale they don't want to do anything in my opinion, just look at M Noonans comments about people fixing. Correct me if I'm wrong as I'm not from a financial background but one of the best ideas I've heard is why don't the state borrow cheaply in the markets, pump that money into AIB and instruct them to drop it's svr to the 2.5%. That would surely lead to loads of new business and activity in the market as people rush to switch away from the likes of BOI and hopefully the state would consequently get back a lot of money by holding onto AIB etc. Alternatively continue the interest relief scheme for people on high rates.
 
The blame for excessive mortgage payments, and any associated financial difficulties, at the moment is directed partially at the government but primarily at the banks.

You have to wonder if introducing such a levy would be political suicide. The difficulties faced by those impacted would be directly blamed on the government and the banks would get away scot-free. It'd also result in mass distrust of contractual agreements related to mortgages in the same way, but more-so, that the pension levy has made some people skeptical of saving for retirement via pensions.
 
I paid around 4% or more on my tracker at one stage. No one was complaining about SVR's back then.

Likewise, I'd like to see how those that have just signed up to 7-year fixed rates would feel if a levy was imposed on them. The terms of the original contract should definitely, and likely will, be stuck to.

Also, a lot of people that have endured the high SVR's over the past few years conveniently forget the fact that a lot of tracker holders paid up to double what they may have paid for their houses.
 
With respect to all, this is a ridiculous suggestion. Penalising people many of whom evaluated options and took a tracker. Are you serious?

Many of the tracker holders are in serious negative equity because tracker mortgages were popular in the 2004-2007 period, just when prices peaked. In fact there is an argument to say that trackers may well have partly inflated the prices as they increased repayment capacity so it didn't exactly benefit tracker holders either.

The period 2002 to 2007 also saw people paying huge levels of stamp duty.

I suggest the following as a counter proposal.

1. Repay the stamp duty to people who paid, or levy equivalent stamp duty on anyone who didn't pay sky high levels.

2. Stop charging property tax to people who paid stamp duty which in effect was property tax except paid at the start. Double taxation!

3. Refund sky high purchase prices paid to people who bought in the peak period and allow people to buy back at the current price eliminating negative equity.

4. Then charge a levy or svr on the new lower mortgages.

The cost of all this to be borne by svr holders so that EVERYTHING is equalised, interest rates, mortgage levels and stamp duties. Doubt svr holders would go for this.

Equally ridiculous right? Just as valid an argument all the same. Irony!

Ps. I fully appreciate that some/many people on svr are really suffering and I have sympathy and understanding of course. But that's not the responsibility of tracker holders, is it? So why seek to penalise or levy them further?

Lots of others on svr have mortgages well paid down or bought at lower prices and low if any stamp duty paid.

Finally, a real life case. My next door neighbour bought their house at half what we paid but they are on svr. You really want me to subsidise their mortgage? As I said ridiculous and extremely unfair.

I wish this bandwagon of seeking to penalise tracker holders would stop, and frankly the jealously and sometimes bitterness towards tracker holders would stop also. Lots of people struggling both svr and tracker holders.

Finally, a contract is a contract and it would be detrimental and illegal. Would destroy the market and drive arrears sky high also.

No simple solution unfortunately.
 
This sounds a lot like Communism.

What's next? Why don't we identify people who bought properties cheaply and hit them with 66% capital gains tax instead of the standard 33%?
 
It's a ridiculous suggestion , these trackers aren't even the problem , Its this state we live in where you are rewarded for been foolish with your money and penalised for been a prudent saver , if I lose my job tomorrow I won't get a penny off the state because I have saved hard , If someone else who worked along side me that went out and p*ssed there money against the wall every week and went on extravagant holidays bought a house out of there means and car loans etc lost their job they would get social welfare.

I know a few people around my age that spent money foolishly bought houses that where clearly too expensive and are now struggling they are not paying the mortgage but they are still living there somehow , you see Brendan posting here about people not paying their mortgage and going to court or not showing up and getting away with it , kick them out of the house and let someone like me trade up to a more expensive house , nobody in this country seems to want to take responsibility for their finances , borrow money can't pay it back and it's somehow the banks fault - these are the real people who are making the cost of SVR's so high.

A fair compromise might be put everyone on a tracker rate on the agreement that if you miss your mortgage payments you can be removed from your house.
 
There are a lot of valid arguments against some sort of levy and I'm sure if I had a tracker is be against it too. But if the banking system can't recover without charging excessive svr rates to compensate for loss making products the government and the banks have to come up with a way to share the burden.

We all get charged an insurance levy for the failure of Quinn insurance, maybe a similar levy should be charged on all mortgages?

What would happen if the ECB rate rose massively but the banks blended cost of funding didn't and tracker holders started being charged massive rates? I'm not sure if that's possible but if the banks cost of funds aren't directly related to the ECB rates it could happen. A banking levy could then help tracker mortgage holders.....

I think everyone should be entitled to an affordable rate on their home if possible.
 
1. Quinn levy going going to pay for that problem. It's not being charged to one group and then used to subsidise other people who bought more expensive insurance policies.

2. To rephrase Daffodils last comment . ..... Everyone should be entitled to an affordable mortgage and repayment on their house. Interest Rate is only one aspect of the repayment, the level of mortgage is also critical. Can't simply look at the rate and dismiss mortgage levels.

Share the burden? Ok so, let everyone in similar house pay exactly the same amount. Don't selectively focus on people with trackers though. What of people who bought cheap houses. Or these with low mortgages. Charge them more?

Where does it end. Communism as indicated earlier?
 
There are a lot of valid arguments against some sort of levy and I'm sure if I had a tracker is be against it too. But if the banking system can't recover without charging excessive svr rates to compensate for loss making products the government and the banks have to come up with a way to share the burden.
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Hi Daffodils

We have had this discussion elsewhere but you seem to be assuming that performing trackers are loss making for our banks and need to be "subsidised".

If that was the case, ask yourself why our banks are not offering discounts for borrowers on trackers to repay their mortgages ahead of schedule? They're not because trackers are not loss making.

The primary reason why mortgage rates in Ireland are now high relative to other euro zone jurisdictions is the level of defaulting borrowers. Roughly one in ten mortgage borrowers here are in default - the rest of us have to carry that cost.

Fundamentally it's not more complicated then that.
 
With respect to all, this is a ridiculous suggestion. Penalising people many of whom evaluated options and took a tracker. Are you serious?
Thanks for treating my comment with such respect.
It was just a sort of random idea/suggestion.
As I said I am sure that I hadn't thought everything through.
Your suggestions may have as much validity.
But lots of financial instruments have been subject to levies after the fact - e.g. insurance policies, pensions, the 8 year rule on unit linked funds etc.
So why not tracker mortgages?
I'm not promoting this but just wondering if it may be one possible piece in the jigsaw of dealing with the mess that we're STILL in with mortgages?
I'm not sure what "bandwagon" you're referring to as I never heard anybody else suggesting any sort of "levy" on them before - and the few people that I commented to about this before looked aghast at me!
 
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