# Some lender should offer tracker customers of other banks a trade-up product



## Gordon Gekko (17 Mar 2019)

Brendan Burgess said:


> No, no other lender would give you a tracker mortgage now, just because you have one with another lender



There’s a gap in the market for a bank to do just that. With banks wanting but struggling to write loans, why not allow people to take their third party tracker across with them? Given where Irish rates are relative to the banks’ cost of funds, it’d still be highly profitable. Maybe restrict the percentage of the transferred amount and add 1% like most of them do. It’d generate business though surely.


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## Brendan Burgess (17 Mar 2019)

A very interesting idea but a few problems. 

It would be very profitable for say, BoI, to take on a Pepper customer and give them a tracker at ECB +2% on their transferred amount and their normal rates on the balance. 

But BoI customers might well demand 2% trackers. 

I think that they would have to limit it for 5 years. 

The fundamental problem though is that their funding costs are no longer directly linked to the ECB rate, so pricing any mortgage based on that is risky.

Brendan


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## Gordon Gekko (17 Mar 2019)

Hi Brendan,

I don’t think BOI customers would be within their rights to demand trackers.

It’s just a product/strategy to deal with the existing loans.

Perhaps the new bank would limit the legacy tracker piece to 50% of the value of the loan?

e.g. €250k comes across and €250k of new borrowings is added to make €500k.


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## Brendan Burgess (17 Mar 2019)

Gordon Gekko said:


> I don’t think BOI customers would be within their rights to demand trackers.



They certainly would not have the right to a tracker, but they could make a fuss about why customers of other banks are getting better rates. 

Brendan


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## Jim2007 (18 Mar 2019)

Gordon Gekko said:


> There’s a gap in the market for a bank to do just that. With banks wanting but struggling to write loans, why not allow people to take their third party tracker across with them? Given where Irish rates are relative to the banks’ cost of funds, it’d still be highly profitable. Maybe restrict the percentage of the transferred amount and add 1% like most of them do. It’d generate business though surely.



This is the kind of thinking that got Irish banks into trouble in the first place.  And one can only hope that they will stay well clear of it in future, although it is unlikely. 

From a business point of view Irish banks need to stop writing poor loans and clean up their T1 ratios for the recession ahead.  Instead deposits should be pushing into investment products where the risk to the bank is low and the returns more or less guaranteed. It other words act like other mainland European banks.


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## NoRegretsCoyote (18 Mar 2019)

Jim2007 said:


> This is the kind of thinking that got Irish banks into trouble in the first place.  And one can only hope that they will stay well clear of it in future, although it is unlikely.
> 
> From a business point of view Irish banks need to stop writing poor loans and clean up their T1 ratios for the recession ahead.  Instead deposits should be pushing into investment products where the risk to the bank is low and the returns more or less guaranteed. It other words act like other mainland European banks.



BoI and AIB have relatively high CET1 ratios by comparison to EU peers.

A tracker at ECB+200bp is probably still profitable. I think Brendan's point about existing customers not being too impressed is more relevant.


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## Gordon Gekko (18 Mar 2019)

Jim2007 said:


> This is the kind of thinking that got Irish banks into trouble in the first place.  And one can only hope that they will stay well clear of it in future, although it is unlikely.
> 
> From a business point of view Irish banks need to stop writing poor loans and clean up their T1 ratios for the recession ahead.  Instead deposits should be pushing into investment products where the risk to the bank is low and the returns more or less guaranteed. It other words act like other mainland European banks.



How is a loan written with a blend of say €200k at 1.75% and €200k at 3.00% a “poor loan”?

The balance sheets of the banks are in rude health; their issue is that they need to write loans.

And, in any event, any such loans would have to be written within the Central Bank rules.


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## Gordon Gekko (18 Mar 2019)

Using BOI as an example, I really don’t think their customers would have a legitimate grievance.

Say I’m an existing BOI customer, Brendan isn’t, and he has an old €250k BOSI tracker at 0.75% which is administered by Pepper. 

If BOI market a product that enables Brendan to take his €250k tracker across at 1.75% and borrow another €250k at 3.00%, I just don’t see what it has to do with me. They already do it for people with existing BOI trackers, and that doesn’t give me grounds for complaint. If I had a tracker, third party or otherwise, the same options would be open to me. As I don’t, I’m irrelevant to the discussion.


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## Brendan Burgess (18 Mar 2019)

Hi Gordon

As a Bank of Ireland customer I don't remotely resent the fact that they have some customers on ECB +1%.
Nor do I resent the fact that they will allow them move these mortgages to new properties at ECB +2%. 

But if BoI gives a customer new to them a tracker at ECB +1.75% while I am paying a fixed rate of 3%, I would be annoyed that they are treating new customers better than their loyal existing customers. 

I fully understand that I have no legal right to object, but I would be annoyed. And would hassle them to give me that rate. 

Separately...

As someone who campaigns for lower overall mortgage rates, I would argue that if BoI can do a profitable mortgage for a new customer at ECB +1.75%, then that should be the rate in the market charged by all lenders. 

Brendan


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## Gordon Gekko (18 Mar 2019)

That’s a reasonable point. I still think that they’d get away with it though; they’re just refinancing and would do the same for you if you had a third party tracker. But as you well know, all of this stuff has a lightening rod aspect to it. The fact that our pillar banks can’t operate on a commercial basis is a problem (e.g. evict people, pay bonuses, etc).


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## MrEarl (23 Mar 2019)

Hello,

I think our Regulator messed up, when permitting historic lenders to exit the marketplace, or allowing loan books to be sold to non lending institutions.  No provision was made for those performing customers, who had homeloans and might want to top up in the future, when it comes to former customers of Banks like Bank of Scotland, Danske Bank etc.

Am I correct in thinking that if I am an existing AIB, BoI, UB, KBC, PTSB customer with a performing Tracker Mortgage, that I can apply for a top up mortgage with that same lending institution, and not immediately lose my Tracker rate (assuming I'm approved for the new facility) ?  In some shape or form, I believe the answer is yes.

If I am an existing former Bank of Scotland, Danske Bank customer etc. with a performing Tracker Mortgage and require a top up mortgage, then I am forced to go to a new lender to get my top up loan, and by extension, I am forced to immediately lose my Tracker because I have to move to a new Bank.  This is not treating customers of the former banks fairly, actually puts them at a disadvantage to their counterparts who are with Banks still lending in Ireland, and falls on the Regulator for having let those customers down badly, in my view.

I find it very interesting to read some of the comments above about why a lender should or should not be providing, or offering to refinance Trackers.  Sure, there's a minimum cost of capital to be covered, an overhead and profit to be obtained above that cost of capital, but it's no secret that homeloan rates in Ireland are too high, higher than in the large majority of the EU, and at this stage it's not about needing to meet minimum capital levels for Irish Banks, it's simply about profiteering.  

As a brief aside, the Irish State owns a sizeable part of the Irish Banking system, and by extension, the total Irish homeloan book.  So, has the Government a conflict of interest between seeing Banks maximising profits to make them appear more attractive and help the Irish State get the maximum price when selling them (or calling for dividends as a shareholder), versus seeing the consumer treated fairly ?  I think the answer is a very short YES and the Regulator knows this only too well, but seems happy to play along.  Simply put, it's screw the individual customers in the hopes of doing right by the State in the longer term.


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## NoRegretsCoyote (23 Mar 2019)

MrEarl said:


> Hello,
> 
> I think our Regulator messed up, when permitting historic lenders to exit the marketplace, or allowing loan books to be sold to non lending institutions.



This is nonsense. You cannot compel a company to offer a product in a competitive marketplace.

Anyway, if banks realised they could never enter the Irish market, they would never enter in the first place either.


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## Brendan Burgess (24 Mar 2019)

MrEarl said:


> I think our Regulator messed up, when permitting historic lenders to exit the marketplace



Hi Mr Earl

I presume you have worded this incorrectly?  Or do you really mean that once a lender enters the market, they must be forced to remain here forever? 



Brendan


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## MrEarl (24 Mar 2019)

Hello Mr. Burgess,

No, I don't think I did word the post incorrectly.

I am not saying that a Bank who enters the Irish market must remain here forever, that would discourage any future competitor from coming in, and be the wrong move.

I expect the Regulator to ensure that consumers are protected.  I do not believe that the Regulator did enough to protect the customers of Banks that have since left the Irish market, and continues to fail those customers.

Customers of former Banks who hold performing Trackers are now in a position where they lose their Tracker immediately, if they need to get a top up loan for something.  That loss is not due to the customer having failed to abide by the terms of their loan agreement etc., but simply because they are forced to surrender their existing Tracker mortgage immediately, in return for being able to take out a new additional debt secured on their property.  That's a financial penalty wrongly being imposed on the customer, in my view.

A Tracker customer of an existing Irish lender does not lose the entire benefit of their Tracker, in return for getting their new top up loan from that same lender, to the best of my knowledge, do they ?

If a Bank elects to leave the market, then sufficient provision should be put in place and enforced by the Regulator, to ensure that customers of that exiting Bank are not disadvantaged.

There's a fairly simple solution here btw....

In the event that a Tracker customer of a former Bank wants a top up loan, and would qualify for one under normal lending criteria, but cannot get one purely because _"Fund XYZ DAC"_ bought their loan from Danske and won't lend new money to them, then that Fund should be compelled to provide a reasonable discount to the customer who is forced to refinance, in order to get their top up loan elsewhere.  The discount being the compensation to the customer, for the customer being forced to lose their Tracker rate prior to maturity of their loan.

Even now, that rule could quickly and simply be imposed to protect customers of those former Banks.  The Funds purchased the loans from the existing lender at a discount, so if they disadvantage the customer, they should be compelled to share the benefits they got when they bought the loans.


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## Brendan Burgess (24 Mar 2019)

Hi Mr Earl 

If any lender gives a mortgage at ECB +1% for twenty years , that is all that they are obliged to do. That is all that they should be obliged to do.  

But they are obliged to do it. The borrowers' right do not change at all if that mortgage is sold. 

If AIB wants to offer a customer with a tracker, a deal to transfer it to another property that is up to AIB. It should not affect the obligations of any other bank whether that bank is active or not in the market. 

The "good luck" of the AIB and BoI customers who can port their mortgages should not mean that Danske and BoSI be obliged to make their customers equally lucky. 

Brendan


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## MrEarl (24 Mar 2019)

Hello Mr. Burgess,

I differ with you on that.  

I do not consider it "good luck" on the part of AIB or BoI customers, they find themselves in a reasonable position where they continue with their normal banking relationship.

Why should the customers of the former banks be penalised ?


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## Brendan Burgess (24 Mar 2019)

There is nothing at all "normal" about a lender giving out money at ECB +0.5%.
There is nothing at all "normal" about a bank allowing someone who has a mortgage at ECB +0.5% to transfer it to another lender.

I have a mortgage with AIB. They give me free current account with it.  So does that mean that you, as a customer of BoI, is being penalised for not having free banking? 

You have a cheap tracker with BoSI - interest only for 30 years.  So am I being penalised because AIB won't match it? 

I think that Ulster was the first to bring out the tracker mover product.  Does that mean that customers of AIB and BoI were being penalised because they had no such product? 

AIB now gives the tracker mover for the life of the product. Does that mean that Ulster is penalising their customers because they do it for just 5 years? 

If you have a cheap tracker with Danske and can't move it to another lender. You have not been penalised. In fact, you have saved thousands of euro. 

Brendan


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## Jim2007 (24 Mar 2019)

MrEarl said:


> Hello Mr. Burgess,
> 
> I differ with you on that.
> 
> ...



Right so following your logic, if I was to buy a certain car and for whatever reason the manufacturer decides to discontinue services in Ireland, other car manufacturers in Ireland should be required to give me car services etc on the same basis as their own customers....

Your position has no basis in commercial reality.  First of all as far as a bank is concerned there is no such thing as a mortgage, it is a generic term just like 'car'.  Each bank has a group of financial products that are known as mortgages.  Each product is constructed according to a number of assumptions that are expected to generate a certain return: cost of financing, assumed default level, additional services included in the package etc..  Taking out a mortgage is exactly the same as going to buy a car, deep freeze, fridge etc. - you pick a particular product, with a particular set of features, services etc...  

Now expecting that any vendor should be required to provided you with services associated with their product, just because you bought a similar product from a competitor is simply a non started.  No commercial enterprise could survive on your kind of logic.  No matter how often you repeat it.


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## Brendan Burgess (24 Mar 2019)

Jim2007 said:


> Right so following your logic, if I was to buy a certain car and for whatever reason the manufacturer decides to discontinue services in Ireland, other car manufacturers in Ireland should be required to give me car services etc on the same basis as their own customers....



To be fair, I don't think that is what he is saying. 

He is saying that if you buy a Toyota, and two years  after you buy it, Toyota decides to allow you a free upgrade then he is being penalised because he bought a Renault and Renault don't allow that. 

Brendan


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## MrEarl (26 Mar 2019)

Brendan Burgess said:


> To be fair, I don't think that is what he is saying.
> 
> He is saying that if you buy a Toyota, and two years  after you buy it, Toyota decides to allow you a free upgrade then he is being penalised because he bought a Renault and Renault don't allow that.
> 
> Brendan



Sorry Mr. Burgess, but that is not correct either.


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## MrEarl (26 Mar 2019)

Brendan Burgess said:


> There is nothing at all "normal" about a lender giving out money at ECB +0.5%.
> There is nothing at all "normal" about a bank allowing someone who has a mortgage at ECB +0.5% to transfer it to another lender.
> 
> I have a mortgage with AIB. They give me free current account with it.  So does that mean that you, as a customer of BoI, is being penalised for not having free banking?
> ...




Hello Mr. Burgess,

Not quite right I'm afraid.



> I have a mortgage with AIB. They give me free current account with it.  So does that mean that you, as a customer of BoI, is being penalised for not having free banking?



No, as I have the option to move, or stay - either way, I can have a current account.  In my circumstance, I don't have the option to stay with my lender, and get a top up loan (on current lending rates obviously)



> You have a cheap tracker with BoSI - interest only for 30 years.  So am I being penalised because AIB won't match it?



No, as I elected to take out my homeloan on a Tracker basis, I may have gone for an AIB SVR, just as you may have gone for a Tracker with BOSI / Danske etc.  We both had choices at the time.  Competition in the market today is not what it was in times past, there's different rules applying to capital reserves, Banks Balance Sheets are different now to then etc. so that impacts on the lending margin that banks are applying as we both know.



> I think that Ulster was the first to bring out the tracker mover product.  Does that mean that customers of AIB and BoI were being penalised because they had no such product?



No, they had a choice to move to Ulster Bank in that example, but elected to stay with AIB or BoI.  Their choice ... in my instance, I don't get the choice I am compelled to move, and incur a significant financial penalty.



> AIB now gives the tracker mover for the life of the product. Does that mean that Ulster is penalising their customers because they do it for just 5 years?



Some might say yes, but I say no.  In either instance, the key point is that both AIB & Ulster Bank customers can have a top up loan without moving lender, and don't lose their Tracker immediately.



> If you have a cheap tracker with Danske and can't move it to another lender. You have not been penalised. In fact, you have saved thousands of euro.



Incorrect.

I made a commercial decision and it's worked in my favour.  The benefit of a good decision should not be removed from me, because I want to take out a new additional loan on current market terms.




If I need a top up loan on my property, then I am compelled to lose my Tracker immediately because of the actions of the former lending bank, and the consent of the Regulator.  If someone has a Tracker with a bank still operating in the country, they don't lose their Tracker the day they draw down their new Top up loan.  They can chose to stay with their existing lender.  I don't have that choice. Therefore I'm disadvantaged through no fault of my own.

There's a key difference between those who can obtain a top up loan with their existing lender, and those who cannot.  Those who cannot are the ones being penalised as I describe earlier.


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## Brendan Burgess (26 Mar 2019)

Lenders are under no obligation to give top up loans.

Lenders are under no obligation to allow borrowers move their trackers.

If AIB makes a commercial decision tomorrow that they will no longer allow their tracker customers retain their trackers if they move home, will you say that AIB customers are being "penalised"? 

Brendan


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## MrEarl (29 Mar 2019)

Brendan Burgess said:


> Lenders are under no obligation to give top up loans.
> 
> Lenders are under no obligation to allow borrowers move their trackers.
> 
> ...



Hello Mr Burgess,

If AIB make a commercial decision tomorrow on not permitting people to retain their trackers if they move home, that will be different to the issue I'm calling out, which is nothing to do with moving house.

If AIB or another one of the current Banks is requested to provide a top up loan secured on the home owners property, the Borrower meets their lending criteria for this second (new) loan secured on the residence, and then says "oh, by the way, you have to lose your Tracker rate immediately on your existing loan, to get your new (second, top up) loan", then that's treating the customer unfairly. It's charging the customer significantly more, for taking out the new second top up loan.  I think it's for this very reason, that there's some sort of arrangement made for existing Tracker customers across the existing banks, who seek to obtain a second top up loan etc.

Lenders are in the the business of lending once the criteria for lending is met.  We are comparing apples and oranges here, when we talk about licensed Banks who are existing lenders, and other third parties that are not lenders.  Ironically, this is the route of the problem that I've called out above.


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## Brendan Burgess (29 Mar 2019)

OK, so the thread title referred to trade ups but I see that you are referring to something different. 

Forget the tracker for the moment.

If you have a non-tracker mortgage with KBC and they decide to withdraw from the Irish market and stop doing top-up loans, do you think that the Central Bank should intervene and force them to do so? 

If they sell that fully performing loan to Vulture Fund Limited, do you think that the Vulture Fund should be forced to give a credit worthy borrower a top-up loan? 

Some banks used to give top-up loans without asking what they were for.  So you could buy a car or a holiday or invest in a business.  Now they will give top-up loans only for home improvements as far as I know. Should the Central Bank intervene and tell banks to give out money without asking the reason as long as the borrower meets their lending criteria? 

Brendan


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## MrEarl (29 Mar 2019)

Hello Mr. Burgess,

Firstly, it's a fair comment about the title of this thread possibly causing a bit of confusion here - I'm glad you've spotted it.

Secondly, in response to your questions:

Re: KBC example, I think the Central Bank should put provision in place to ensure that the customer is treated fairly, if they have to move their loan (post KBC Ireland exit), in order to get a banking service that they would otherwise get from KBC, if it were still trading in Ireland

Re: Purpose of the loan - I'd be far more concerned with repayment ability myself, then the LTV, but thereafter the purpose is worth considering.  I would not support lending for something like going on a two week's gambling trip to Vegas, but I would support someone being able to avail of a top up loan for something like paying their kids university fees etc.


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