# Coming off Tracker voluntarily - any discounts?



## Lobby (29 Oct 2010)

I read recently that as the banks are losing money on tracker mortgages, it may be possible to reduce the capital amount outstanding by switching to a standard variable, I've seen some economists suggest up to 25% discount for switching.

Has anyone done this or even enquired about it?


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## rgfuller (29 Oct 2010)

Why would a bank realise a large loss now just to get you off a tracker mortgage which may only be costing them a few percent a year ?

It just doesn't make financial sense on their part unless they forsee paying more for their own borrowings than the ECB rate over many many years, but even then I'd say they would perfer to write off as little as possible these days.

There was another thread on this subject but I don't believe anyone posted.
http://www.askaboutmoney.com/showthread.php?t=137340&highlight=tracker
and
http://www.askaboutmoney.com/showthread.php?t=139851&highlight=tracker


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## Lobby (29 Oct 2010)

rgfuller said:


> Why would a bank realise a large loss now just to get you off a tracker mortgage which may only be costing them a few percent a year ?


 
That was my thought, as the ECB rises sometime 2011 onwards, the trackers will be less of a problem for the banks (I presume, unless their wholesale borrowing costs equally rise with ECB).

However, if it could be calculated that the banks are losing, say, €1,000 per year on a 100,000 mortgage then they would have an incentive to move someone off the tracker rate and take the hit in one year (especially when they are state controlled in some cases) before returning to private/public (non-state) ownership in a few years time.

This scheme is only of use to the mortgage holder, if they can also pay off a significant amount of the mortgage at the time they are switched to standard variable rate. Which, in my case, is not an option. 

I'm mostly wondering aloud here. (this question arose in a discussion of "what would you do if you won the lotto?" - on a low rate tracker you'd probably be better to hold the winnings in a deposit account and keep paying the mortgage monthly by direct debit rather than paying it off immediately.)


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## Mpsox (29 Oct 2010)

Financial regulator found no evidence of this happening, but has warned lenders to be careful if they do
[broken link removed]

Interestingly Uk banks are relaunching trackers to move people off variable rate 

http://www.mortgagerates.org.uk/news/standard-rat/


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## RMCF (30 Oct 2010)

Its an urban myth. There are no discounts being offered.


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## Alan Robert (8 Nov 2010)

I have a tracker mortgage on a residential mortgage, and another tracker mortgage on an investment property. The bank is loosing money on both these. If I offered to pay both mortgages off completely, not re-mortgage, would the banks do a deal? The interest rate being charged is c.2%. What is costing the bank to fund that mortgage? 4%? 2% difference, €2000 per €100,000 p.a. Would the bank give me the first two or three years savings and keep the next 17 years for themselves. (Mortgage predominantly interest only so capital not being paid down.) Would they settle €100,00 for €94,000?


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## RMCF (8 Nov 2010)

I personally can't see it. But you could try. As I mentioned in other posts, I asked and was told 'no chance'.


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## Alan Robert (8 Nov 2010)

Why don't you think they would? What is their rationale? If I was their only customer then surely it would make sense to cut their losses if I'm them €2000/€1000? What else would be impacting their judgement?


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## Alan Robert (8 Nov 2010)

.....if I'm COSTING them €2000/€100000.......


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## RMCF (9 Nov 2010)

Only telling you what I was personally told when I asked the mortgage person at the bank. 

I have since posted on here and asked for anyone to post a case when they were given a discount, and no-one has yet to say they have received one.

I wait with baited breath.


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## Alan Robert (9 Nov 2010)

O yes I appreciate you are only telling what you were told, but I'm just wondering if anyone had a view on their perspective.


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## NorfBank (9 Nov 2010)

Banks are not going to give a discount,  at the moment we are in a period of historically low interest rates. The ECB rate is not going to stay at 1% forever, the bank will still make money out of all/most the mortgages on their books over the course of time as the ECB rate rises.

The lenders have also been warned by the Financial Regulator to be very careful about inducing people to come off tracker mortgages.

The whole cash for trackers has stemmed from "expert" commentators putting 2 and 2 together to get 5. Wrong but it sells newpapers..

[broken link removed]


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## Alan Robert (9 Nov 2010)

Is the bank's problem not in relation to the margin between BoE/ECB rates (and by extension my tracker rate) and the rate they can raise money. As the base rates move the margin remains the same between what they charge me and what they have to pay. Am I wrong in my understanding? Is not a structural problem the banks have? Also it is primarily an investment tracker I am considering repaying so the regulator might not to be too interested since it is not a family home. But anyway if the banks won't deal I won't pay them back.


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## NorfBank (9 Nov 2010)

The lender doesn't borrow at ECB, that is the misunderstanding. 

They use a  combination of deposits and EURIBOR borrowing (among others)

3 month EURIBOR is currently around 1%, the problem for the banks was back in the credit crunch of 2008 when 3m EURIBOR was 4.65%.


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## Alan Robert (9 Nov 2010)

Yes, I appreciate that, but unless things change in the interbank market, will, _all other things being equal_, the Euribor not follow to a great extent the ECB base rate?

Thanks for your opinions.


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## NorfBank (9 Nov 2010)

It _should_ but a lender doesn't solely use EURIBOR to finance the mortgage whereas it solely lends at ECB +  a margin. Unless there is another massive spike in EURIBOR without a corresponding increase in ECB then IMHO the banks will not offer discounts for the trackers.


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