# How did banks calculate tracker rates?



## Joeber (6 Jul 2019)

I see on this forum that various people are on different tracker rates. 1.1%, 2.8%, 3.2% etc... 
But how did the banks calculate what rates customers would be on. What's the criteria?


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## Brendan Burgess (6 Jul 2019)

As with all mortgage rates, the banks set the rate at their discretion. 

In the vast majority of cases, the mortgage contract specified what the tracker margin was.  It was set at the time and seemed to be based on what other banks were charging.  Usually they were lower for lower LTVs. 

In most cases where people fixed the contract said "At the end of the fixed rate, you will be offered a tracker at ECB +x%" 

permanent tsb had contracts which said "at the end of the fixed rate you will be on the then current tracker rate.".   They then increased the tracker margins. 

AIB said "at the end of the fixed rate, you will be offered an SVR, a fixed rate or a tracker   at the then prevailing rates" 
But they did not offer trackers as they claimed that they were not prevailing.  They have now said that if they had offered them, they would have been prohibitive, which is why hundreds of customers are appealing this decision.

Brendan


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## NoRegretsCoyote (6 Jul 2019)

It depended on how competitive the market was at the time.


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## moneymakeover (6 Jul 2019)

Original contract specified a margin

The rate would then be ECB rate + margin.

Typical margin: 0.8%, 1%, 1.1%, 1.25%.

Then as the ECB rate varied (currently zero) the tracker rate varied.

Margin would remain unchanged for life of mortgage.

Trackers generally had the option to fix.

After the fix period the loan would revert to tracker.


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## Joeber (6 Jul 2019)

Brendan Burgess said:


> As with all mortgage rates, the banks set the rate at their discretion.
> 
> In the vast majority of cases, the mortgage contract specified what the tracker margin was.  It was set at the time and seemed to be based on what other banks were charging.  Usually they were lower for lower LTVs.
> 
> ...


My tracker, for example is 1.1%. I was wondering for ages as to why I was contracted to this rate while others were on higher rates. It didn't seem fair until I reviewed my redress letter and then looked at the info on open24 which under the mortgage type it states that greater than 80% and less than €500,000
i.e. 100% mortgage with a value of less than half a million borrowed...

I'm assuming that if the mortgage had a 20% or higher deposit or more than €500,000 borrowed, then the tracker rate would be different.

It would be worth for other people to look at this info on their open24 accounts (or equivalent) to know what bracket they fell into.


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