# variable vs tracker



## sylwia911 (11 May 2011)

I've bought an apartament in 2008. From the begining I was on variable (my broker advised that). Can anybody explain me the tracker? Am I loosing the money being on variable? Because what I can read  monthly repeament is much lower on tracker. Thank You


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## Sunny (11 May 2011)

A tracker mortgage is at a fixed margin over the ECB base rate e.g. ECB +1%. Therefore the bank has no flexibility to increase rates. They only go up and down when the ECB change the base rate. On the other hand, with a variable mortgage, the bank can pretty much charge what it wants. 

You shouldn't have been advised to take a variable rate mortgage but there was a time when variable rates were less than trackers so maybe that's why he advised it. I don't think they were in 2008 but could be wrong. It was a shortsighted view by your broker. Not much you can do now though.


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## sylwia911 (11 May 2011)

Thank You Sunny! So now  is there imposible to change to tracker?


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## aristotle (11 May 2011)

Sunny said:


> there was a time when variable rates were less than trackers


 
Was there? I don't remember than being the case?


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## Sunny (11 May 2011)

aristotle said:


> Was there? I don't remember than being the case?


 
Yeah. I could have got a cheaper variable rate when I bought in 2006.


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## Sunny (11 May 2011)

sylwia911 said:


> Thank You Sunny! So now is there imposible to change to tracker?


 
Afraid so. Banks are trying get people off trackers.


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## sylwia911 (11 May 2011)

Thank You for replies!!!!!


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## Knuttell (11 May 2011)

Sunny said:


> You shouldn't have been advised to take a variable rate mortgage but there was a time when variable rates were less than trackers



Probably you mean a heavily discounted variable teaser rate for the first 6 months?

From about mid 2008 lenders started to edge away from tracker mortgage products,falling interest rates and increased borrowing costs for Banks coupled with the fact 99% of Irish tracker mortgages did not have a collar built into them made the Banks realise they had screwed themselves royally...too late though,having said that there were a few Banks still doing them right up to the end of 2008 if I recollect correctly?

( a collar is a mechanism that stops a tracker mortgage tracking the ECB or Central Bank if the interest rate falls below say 2.5%.Collars would have been built into a lot of UK mortgages)


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## Sunny (11 May 2011)

Knuttell said:


> Probably you mean a heavily discounted variable teaser rate for the first 6 months?
> 
> From about mid 2008 lenders started to edge away from tracker mortgage products,falling interest rates and increased borrowing costs for Banks coupled with the fact 99% of Irish tracker mortgages did not have a collar built into them made the Banks realise they had screwed themselves royally...too late though,having said that there were a few Banks still doing them right up to the end of 2008 if I recollect correctly?
> 
> ( a collar is a mechanism that stops a tracker mortgage tracking the ECB or Central Bank if the interest rate falls below say 2.5%.Collars would have been built into a lot of UK mortgages)


 
No, in 2006 I was offered the choice between a tracker of ECB + 1% or a variable rate that at the time was at ECB + 85/90bps (No teaser discount). I also had the bank telling me that variable rates will never rise more than the ECB rate and might even fall more because of the increased competition in the Irish banking system. Luckily, I work in banking so I know the difference between a contractual committment to track the ECB rate and a banks sales promise.


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## NorfBank (11 May 2011)

Sunny said:


> I also had the bank telling me that variable rates will never rise more than the ECB rate and might even fall more because of the increased competition in the Irish banking system.


 Ya gotta love 'em.


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