# Any chance of Banks "wriggling out" of trackers ?



## Mixednuts

Is there any chance of banks wiggling out of contracts for tracker mortgages , or change rates seen they are (presumably) loosing money on them ?

My reason for asking is because my tracker mortgage (.8 + ecb )is the only reason I am not moving home.
If I thought I could be trumped by the banks and they change rates etc for trackers then my reason for sitting tight is kinda diluted ?

M.


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## rosemartin

i am on .75  have recently been granted a top up for extension, but this portion is at standard variabile rate. they did not try anything to get me off.  was with first active, now ulster bank


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## PatriciaFox

serotoninsid said:


> Isn't there going to be a lot of work involved in this for them.  Revaluations required for a start and there must be an admin overhead associated with this.  Its not like all the std. var. rate mortgages where they can simply change the rate at the click of a button on thousands of mortgages..



I spoke with someone in banking before about Trackers and they hinted to look at the T&Cs.
I'm not certain as I haven't looked at the T&Cs. Would they be vague enough to allow for the Tracker product to be simply discontinued/withdrawn in totality? 
I guess that would push everyone onto variable or fixed..


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## Latrade

Mixednuts said:


> What was he hinting at ?


 
IIRC some are said to have an "exceptional circumstances" clause.


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## DrMoriarty

I'm on that NIB ECB +0.5% tracker too, and repaying it as slowly as I can. The T&Cs allow NIB to convert the loan to their 'then applicable Home Loan Rate (fixed or variable as the case may be)' if I cease to keep open a current account within their 'Easy' package — which includes a fee-free option.

I don't have to use the account for anything other than servicing my loan repayments. But if I close it, bang!


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## jhegarty

Latrade said:


> IIRC some are said to have an "exceptional circumstances" clause.



No vague phrase like that would every be upheld by a Judge.


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## serotoninsid

DrMoriarty said:


> I don't have to use the account for anything other than servicing my loan repayments. But if I close it, bang!


Thanks for the heads up on that - I had no reason to close it but didn't know they could use it as an excuse to wrestle the tracker away from me!

From my cold dead hands...


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## elefantfresh

A direct quote from the AIB website.

"A Tracker Rate is a set percentage (margin) above the ECB rate and so it 'tracks' changes in that rate. This margin is guaranteed for the full term of the loan unless there is a material change in the terms of the loan.

The agreed margin as set out in the customers loan documentation will not change, even if the Bank subsequently introduces a different Tracker Mortgage offering, at a margin which may be either higher or lower than agreed as per the loan contract."


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## Vega

A friend was asking me about a letter he got from his bank offering to move him from a tracker to a standard variable rate, saying it might be in his interests.  Surely it would not be, and surely the banks should not be sending those letters?  How could it be in his best interests?


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## aristotle

NIB have stated in the past that they would not look to move people onto variable mortgages even if their LTVs are now not meeting the criteria set out. It was on the front page of the Sunday Business Post over a year ago. Who knows if they may change their stance but it would be hugely difficult for them (every house would need to be independently revalued and that alone requires the houseowner to give access to the inside of their house?) and I have no doubt there would be a backlash from their customers.


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## twofor1

aristotle said:


> NIB have stated in the past that they would not look to move people onto variable mortgages even if their LTVs are now not meeting the criteria set out. It was on the front page of the Sunday Business Post over a year ago. Who knows if they may change their stance but it would be hugely difficult for them (every house would need to be independently revalued and that alone requires the houseowner to give access to the inside of their house?) and I have no doubt there would be a backlash from their customers.


 
They did state they would not increase rates if LTV’s if went over 80%, here’s the link to that article.

http://www.thepost.ie/story/text/mhqlkfidkf/


What’s to stop them just doing it on the basis that all the property price indexes state that property prices have dropped nationally by over 30% in the last 3 years? To back up their case they could even pay an auctioneer for a drive by valuation. Their Terms and conditions do not state how they determine if the LTV has gone over 80%.

What could one do if they did do it, if you were not in negative equity and still had a good wage etc, you might be able to switch to another bank but trackers are no longer available. 

You could complain to the Ombudsman. But the bank might have a good case as their terms and conditions allow for this switch, the argument would be is a property price index and even a drive by valuation acceptable to show the LTV has gone above 80%.

Even if you did win your case and they had to leave you with your tracker rate, they would not be to upset, as we have seen in other cases taken against banks, only a small minority would go this far but the vast majority probably would not.

No doubt there would be unhappy customers, but look what the bank have to gain.

I


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## Complainer

Vega said:


> A friend was asking me about a letter he got from his bank offering to move him from a tracker to a standard variable rate, saying it might be in his interests.  Surely it would not be, and surely the banks should not be sending those letters?  How could it be in his best interests?


Which bank?

Can you get the letter and post the exact wording?


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## Shawady

Charlie Weston makes an interesting statement in his article. Probably a long shot but would banks try and tempt customers off it with some sort of lump sum up front?
_"In fact, trackers are such good value for consumers that we may soon see a situation where lenders attempt to buy homeowners out of these deals"_

http://www.independent.ie/opinion/c...pretty-but-variables-must-change-2135333.html


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## NorfBank

annR said:


> What does he mean by that?  How could a bank buy someone out of a tracker mortgage?



Presumably bank will offer to reduce the mortgage by €x or give the customer a lump sum in cash if the customer comes off the tracker and goes on a variable or fixed rate.


www.moneybackmortgages.ie


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## NorfBank

serotoninsid said:


> As regards the bank offering a cash incentive to drop the tracker, they're hardly going to offer the equivalent saving?



Nope but in these cash strapped times, people might jump at the chance of money now over long term savings.

e.g the tracker will cost the bank say 50k over the remaining term versus the variable, it offers 15k to the customer in cash with the proviso that this lump sum will have to be repaid if the customer switches the mortgage or redeems it early. How many people would go for this? Say they offered 20k, 25k?

I cannot see it happening as it would amount to the lender preying on the current misfortune of it's customers.

_*IF*_ it did happen, maybe the non state owned banks would be the first to attempt such scurrilous behaviour!

All the above is pure speculation obviously.

[broken link removed]


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## csirl

I've a tracker with one of the big lenders. When house prices went through the roof, I renegotiated the rate, getting it reduced, because the increase in house prices changed the LTV - essentially I told the bank that I'd move to another lender who were offering a better rate based on the LTV. Bank reduced my rate to match the rival lender. The contract amendment that gave effect to this did not mention the LTV - it was a simple one line i.e. "in clause X, insert "rate = ecb plus Y" in place of "rate = ecb plus Z"". So even though I got a better rate based on the change in LTV, the LTV is not mentioned in the contract, so the tracker cannot be changed or cancelled due to a change in LTV. I believe that this is the norm with a lot of the big lenders.

In summary, while you may have got a particular rate because of what your LTV was at the time you negotiated or renegotiated the loan, in most cases, there is no mention of LTV in the contract.


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## serotoninsid

NorfBank said:


> Nope but in these cash strapped times, people might jump at the chance of money now over long term savings.
> 
> e.g the tracker will cost the bank say 50k over the remaining term versus the variable, it offers 15k to the customer in cash with the proviso that this lump sum will have to be repaid if the customer switches the mortgage or redeems it early. How many people would go for this? Say they offered 20k, 25k?


If thats what they will be offering, I think I will stick with my tracker.  And it was through starting to read posts on AAM in the lead up to my house purchase that I knew the tracker deal was the one to go for - so thank you AAM!


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## jinx9000

Is it the end of the line for cheap  tracker mortgages?

Irish tracker-mortgage holders enjoyed huge  financial benefits as the ECB rate fell but lenders lost out. Jon Ihle  looks at clauses banks may use to revoke trackers


http://www.tribune.ie/article/2010/jan/24/is-it-the-end-of-the-line-for-cheap-tracker-mortga/


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## kkontour

Last year UB offered me a 2 year fixed rate of 1.95% to come off my ECB+.7% tracker.
I ignored the letter and they rang me a few days later. I declined the offer.
The very next day the ECB reduced their rate by a further .25%


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## elefantfresh

On a slightly more positive note, I spoke with my bank (AIB) about 2 years ago regarding my tracker and the nice chap told me "whatever you do, stay on your tracker." I thought that was very decent of him!


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## RMCF

Paulk said:


> *If only a couple or a few of the banks renege on tracker mortgages, it will look really bad from a PR point of view. Can you imagine the backlash and anger from customers if they find out that their bank is cancelling their tracker mortgage* while other banks are not changing their tracker deals. There would be a lot of coverage in the media too which could seriously discourage potential customers from choosing the banks which decided to renege on the tracker deal.
> 
> Banks need to think strategically and not just about existing customers!



But legally can banks actually renege on their contract with you?

Would you not be able to thake them to court if they did?

I currently owe approx €75k - I will switch to a variable or fixed rate if they take €30k off my capital

As another poster has just mentioned, those of us on trackers are at a disadvantage if we decide to move. I was thinking of self build or possibly buying in the next 3 or 4 yrs, but they surely would use this desire to get people out of their trackers?


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## callybags

How can you be at a disadvantage if you are on a tracker rate and want to move?

All that will happen is that you will go on to a standard variable rate.

What are you at a disadvantage against?


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## Mixednuts

Well for me it means going from 1.8% to 4.0% ... that's a big jump , I could afford it but have to factor in all the other costs that come with moving home


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## Paulk

RMCF said:


> But legally can banks actually renege on their contract with you?
> 
> Would you not be able to thake them to court if they did?



This is the million dollor question right now! I would have thought that the answer is a firm no ie they cannot renege on their contract with you. 

I can't see just a couple of banks getting away with reneging on their tracker deals. I think it will be a case if one bank does it, they will all follow. Otherwise, none of the banks will be successful in cancelling current tracker deals.


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## serotoninsid

desperatedan said:


> I said that my other alternative was to put the funds into a competitor bank, on deposit paying more than the rate I am paying for the Mortgage.


Surely your savings should simply be in whatever account gives the highest return currently regardless?  That's what i'm doing - and thanks to the AAM key post on savings rates, its very easy to determine what offers the best value when going from one fixed term deal to another.


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## Paulk

Article in today's Independent re tracker mortgages:

http://www.independent.ie/business/...eking-to-alter-tracker-mortgages-2140419.html


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## Mixednuts

Somebody has been reading askaboutmoney.ie

quote;
He says the question really was whether any of the banks that have ECB tracker rates will try and look at the fine print of the mortgage contracts which might allow them some "wriggle room", Mr Oakes said on RTE's 'Morning Ireland'.

"wriggle" hey that's my word 

But on a serious note , anyone any suggestions or angles the banks might take to get out of trackers with it's customers .


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## OakesP

Mixednuts said:


> Somebody has been reading askaboutmoney.ie
> 
> quote;
> He says the question really was whether any of the banks that have ECB tracker rates will try and look at the fine print of the mortgage contracts which might allow them some "wriggle room", Mr Oakes said on RTE's 'Morning Ireland'.
> 
> "wriggle" hey that's my word
> 
> But on a serious note , anyone any suggestions or angles the banks might take to get out of trackers with it's customers .


 

I have to say I had no idea of this discussion when I did the radio programme on Morning Ireland. A friend called me today (18/04/2010)about this thread. So sorry to say I did not borrow anyone's wording. I used 'wriggle room' in the UK press about a year and a bit ago on the same topic. But I am glad that more than one of us reached the same conclusion . 

All those with ECB tracker mortgages should read the mortgage documentation first and foremost. A lot of these agreements allow - in certain circumstances - the substitution of the ECB rate for another rate. Thus if that other rate is higher (which it will need to be for the bank to elect to switch) , the bank (if it could pull it off) would be able to effectively raise the interest rate suffered by the borrower. However I suspect that all those with ECB trackers will argue that the bank informed him/her verbally that the rate was ECB for life. I should expect the courts would entertain this evidence based on the parole evidence rule, the creation of a collateral contract or estoppel (i.e the bank cannot argue that the Manager's statement is outside the written contract). Furthermore I should think that the FSO will give a sympathetic hearing a borrower in these circumstances too. 

Since I made that statement, off the cuff, a number of people have contacted me with stories about how their banks have approached them to move off their ECB tracker. Now whether this is a formal and clear bank policy (and instruction) or the actions of specific branch managers is not yet clear.

Peter Oakes


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## serotoninsid

OakesP said:


> However I suspect that all those with ECB trackers will argue that the bank informed him/her verbally that the rate was ECB for life. I should expect the courts would entertain this evidence based on the parole evidence rule, the creation of a collateral contract or estoppel (i.e the bank cannot argue that the Manager's statement is outside the written contract). Furthermore I should think that the FSO will give a sympathetic hearing a borrower in these circumstances too.


Ok, well this is positive.  Does anyone still have any of the marketing blurb for any of these tracker deals from any of the banks?  I know when I went to NIB, they gave me promotional stuff on their LTV tracker but I don't tend to read marketing type stuff as it tends to be misleading!  Would be good to check if it inferred ECB+X% for the duration of the mortgage...


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## twofor1

Another positive in an article in today’s Business Post about banks wriggling out of trackers.

   In it a spokesperson for the Financial Regulator says read your terms and conditions and see what is permitted, and refers to the Consumer Protection Code which states that;

  ‘’A regulated entity must ensure that all information it provides to a consumer is clear and comprehensible, and that key items are brought to the attention of the consumer. The method of presentation must not disguise, diminish or obscure important information’’


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## OakesP

I cannot post the link to today's Sunday Business Post by Kathleen Barrington because I have not posted 15 times (its a rule of this site). Would someone else please post it - if you don't have it, email me and I will send it to you. It is worth reading first hand.

In the article KB cites an unnamed bank employee confirming to her that his/her bank and others are looking at ways of getting borrowers off ECB trackers.

The statement from the regulator (quoted immediately above in ‘twofor1’s” psoting) is encouraging but it is a stock/library answer, just like the FR's former 'overcharging press releases' and promises by their former senior executives that firms must comply with the Code or be sanctioned for overcharging issues (then Elderfield joins the FR and basically criticises the regulator’s past action – and those of firms – for dragging their heels on this issue). I think the other quote from the FR in the SBP article is more relevant that this ‘‘_would appear to be a matter of contract between the provider and the consumer, and customers should carefully examine their terms and conditions to see what is permitted under their contract_’’.

The fact that the issue is addressed in the legal documentation does not mean it is obscured. I certainly don't want to raise undue concern here at all. I am suggesting that those with trackers read both their mortgage documentation and any marketing documentation provided at the time of the loan being taken. If in doubt write to your bank to request the information and go one step further - ask the bank to reconfirm the promise you believe was made if after reading your contract documentation you think there is a conflict. I see 'Mixednuts' is writing to his bank, so why not follow that lead if you do not have the material?

If the bank does not respond or seeks to charge you a fee for the information or otherwise frustrate your request, respond by informing it that you file a section 4 Data Protection Act 'Access Request' for a copy of all personal data it holds on you. The bank can only charge €6.35 to action the request and many do not because of the cost of processing such a low value amount. The bank will soon get the message and had over the specific loan documentation you have requested or be faced with a very costly exercise of having to give you a copy of all your personal data within the provisions of the DPA. [_Separately, I can inform from personal experience where I advised an institution which thought it could ignore an Access Request because it did not refer to the relevant section number in the DPA that if it wanted to tick off the customer and the Commissioner got involved, it was looking at €15,000 in costs to eventually comply. Guess what they did – yep they gave the person the specific requested information to avoid a general disclosure requirement_]. 

A cheap and most simple way to perhaps put this tracker (and any ancillary LTV) issue to bed is as per the link on - 
[broken link removed] 
- _'we should expect that the Irish Banking Federation (speaking on behalf of the banks) or the banks themselves to give a commitment to borrowers on ECB trackers that the banks will not seek to alter the promises made to consumers despite any fine print in the mortgage contracts_.' [disclosure – this is my website]


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## theclassic

*Tracker Mortgage holders could create a group to institate Legal Action*

twofor1 - my tracker is with AIB & states the terms are ECB +.6% unless there is a 'material change' in the mortgage. *The terms & conditions, such as they are, are set out on 1 no. page letter and at first glance appear very straight forward.*
In any event I think the financial insitutions went into the tracker mortgage option with their eyes open & we the customers entered into the deal based on the _*'ordinary meaning'*_ of the terms & conditions.

In my particular instance it was & still is my understanding that *the terms pertain unless I change the terms to a significant degree* (or materially) eg not paying back, or getting a top-up amount or using the property as calatoral in another deal, or agreeing to come off the tracker rate.
As far as I am concerned the bank entered into an agreement with me, and if I do not materially change the terms of same, then it holds.

If the bank argue that the deal was predicated on a certain LTV then I will most certainly be arguing that whilst that may have informed part of their assessment when deciding if they should offer me a tracker, the final deal as presented to me in a 1 page letter is not linked to such a formulae:* I entered into the deal based on the terms & conditions as set out in the letter of offer not on their assessment.*

In any event I think our current regulator would not allow the institutions dupe customers in such a fashion. I think he is the Real Deal.

I will not allow AIB renage on our deal & take me of the tracker rate. *I think if moves are made by the financial institutions to renage on the tracker mortgage deal based on a slight of hand, then there would certainly be merit in establishing a group to fund and instigate Legal Proceedings / Class Action*.  
I would be willing to donate a few hundred to a properly formulated and constituted group of persons in a similar situation & I hope there are others. 

In my view the value of being on a tracker can me measured in tens of thousands of euro & in a certain peace of mind - these are worth trying everything to protect.


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## Mixednuts

DrMoriarty said:


> Noone can, just yet — the online edition of the _Sunday Business Post_ isn't available until 6pm.
> The binding document is the loan agrement which you would have signed in the presence of your lawyer and been given a copy of at the time. Surely you've held on to such an important document?




I have all documentation for my mortgage safely put away , but I was on a fixed term for 5yrs , when it ended I wasn't happy with variable rates been offered , argued my case and was offered a tracker package ( which was much better ) at .8+ecb .
That was all done over the phone in 2007 , I then just got a single page letter (which I have)confirming my new rate and payments.

What I will be asking PTSB is the T&C for my current package.
Am I guilty of been to naive ?, and should have asked for a copy/new contract when I first started out on the tracker?
If I am then there must be thousands of me out there .
I am not gonna panic til I see what PTSB say/send me.

OakesP,
Excellent advice on freedom of information , thanks . Least now I know how to approach and what methods are needed for same .


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## OakesP

DrMoriarty said:


> Noone can, just yet — the online edition of the _Sunday Business Post_ isn't available until 6pm.
> The binding document is the loan agrement which you would have signed in the presence of your lawyer and been given a copy of at the time. Surely you've held on to such an important document?


 
The SBP does not upload in full until 6pm but the article I refer to is there now in all its glory. The easiest way of finding it in the absence of me not being able to post it to the group is to go to SBP's website; search on "peter+oakes" and the article from today's edition by Kathleen Barrington is there. Perhaps one of you guys who can post weblinks will copy the link and paste it to the group? 
[I also placed a pdf of the article on the press page of my business website as per previous posting - again I could not insert the hyperlink in full because of this site's 15 post rule - which is understandable and fair enough]. I emailed the SBP link to MixedNuts earlier - he/she might post it?


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## Mixednuts

DrMoriarty said:


> Noone can, just yet — the online edition of the _Sunday Business Post_ isn't available until 6pm.
> The binding document is the loan agrement which you would have signed in the presence of your lawyer and been given a copy of at the time. Surely you've held on to such an important document?





OakesP said:


> The SBP does not upload in full until 6pm but the article I refer to is there now in all its glory. The easiest way of finding it in the absence of me not being able to post it to the group is to go to SBP's website; search on "peter+oakes" and the article from today's edition by Kathleen Barrington is there. Perhaps one of you guys who can post weblinks will copy the link and paste it to the group?
> [I also placed a pdf of the article on the press page of my business website as per previous posting - again I could not insert the hyperlink in full because of this site's 15 post rule - which is understandable and fair enough]. I emailed the SBP link to MixedNuts earlier - he/she might post it?


 

here's the link

 [broken link removed]


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## Paulk

My loan offer has statements like "the rate may vary before the advance is drawn down and will be subject to variation throughout the term."

Statements like these are slightly worrying, but surely a solicitor should/would have highlighted this if she thought it should be an issue of concern?


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## wirelessdude

Paulk said:


> My loan offer has statements like "the rate may vary before the advance is drawn down and will be subject to variation throughout the term."
> 
> Statements like these are slightly worrying, but surely a solicitor should/would have highlighted this if she thought it should be an issue of concern?


 
to me, this refers to ECB rate going up and down


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## Marion

*House Insurance*

People should ensure that they insure their house at least for the value advised by the lender at the time the tracker mortgage was taken out. 

Failure to do so could render the contract void.

Marion


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## Mixednuts

Marion said:


> People should ensure that they insure their house at least for the value advised by the lender at the time the tracker mortgage was taken out.
> 
> Failure to do so could render the contract void.
> 
> Marion



Good point .I currently have my house insurance and mortgage with Ptsb .
Even if they have both figures (ie) valuation&insured amount , I am sure they would use it as a technicality to get out of tracker agreement .


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## serotoninsid

Marion said:


> People should ensure that they insure their house at least for the value advised by the lender at the time the tracker mortgage was taken out.
> 
> Failure to do so could render the contract void.
> 
> Marion


Is this why NIB sent a letter out for proof of insurance some months ago?
I've just had a quick look through some of my paperwork from them following my switch to nib from ub 3 years ago.  Just realised that the valuation at the time indicated a rebuild cost in excess of what i have been insuring it for.  I didn't realise the valuation HAD indicated a rebuild cost.  Insurance coming up for renewal shortly.  I guess I better revert to rebuild cost indicated by valuer...

By the way, rebuild cost seems excessively high in proportion to total valuation (92%) - maybe this is what nib indicated they wanted from their shortlist of approved valuers??


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## Marion

*House Insurance*

Hi 'Sid

Don't wait for the renewal date. Update your house insurance with your current company immediately. 


Marion


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## twofor1

theclassic said:


> *think if moves are made by the financial institutions to renage on the tracker mortgage deal based on a slight of hand, then there would certainly be merit in establishing a group to fund and instigate Legal Proceedings / Class Action*.
> I would be willing to donate a few hundred to a properly formulated and constituted group of persons in a similar situation & I hope there are others.



   Each bank has their own terms and conditions for trackers, even within individual banks terms and conditions are frequently updated or changed. I think different cases will have to be decided on their own merit. For this reason I cannot see a group challenge being effective.

  If any customer of any bank has their tracker withdrawn, surely the thing to do is follow the banks complaints procedure and if the matter is not rectified then take the complaint to the Financial Ombudsman.

  His decision is free and is legally binding to both, subject only to an appeal to the high court.

  If your complaint is upheld he can instruct the bank to rectify any similar cases, if he thinks it is appropriate.


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## Mixednuts

Marion said:


> Hi 'Sid
> 
> Don't wait for the renewal date. Update your house insurance with your current company immediately.
> 
> 
> Marion



Marion,
Do you know something we don't know ?


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## Marion

*House Insurance*

Hi MixedNuts

No I don't. 

But I was thinking about this since speculation arose regarding banks wriggling out of their commitment and I identified house insurance as an area where people could easily slip up in relation to their contract.

Better be safe than sorry!

Marion


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## MáirtInide

Just looking at my Mortgage *Offer of Advance*, which myself and the OH signed in the presence of our Solicitor, who also signed. 

The first page set out the text 

"_Ulster Bank is pleased to offer you an advance as detailed below subject to Special Condition(s) and the General Condition contained in this Document_"

Goes on to give Names, Property, Amount, Period, No. of Repayments, Instalment, Interest Rate, etc etc.

Next page has Special Conditions relating to Loan: _Loan Number_ 

First Line there says:

The rate of the Ulster Bank Flexible Mortgage tracks ECB rate with a margin which is fixed for the life of the Home Loan term. *The Margin for this Home Loan is ECB rate plus 0.95%.* This margin is dependent on the amount borrowed and the value value of the property to be mortrgaged.

The emphasis above is in the Document.


The signature part of the Document was called *Acceptance and Authority*.

This was in 2004, and the Offer of Advance was from Ulster Bank.

Valuation is not a problem, as Mortgage was for just about 30% of the cost of the property at the time.

Is this water-tight, or do UB have any kind of get-ou?.


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## OakesP

I will be talking about this subject on Newstalk tomorrow morning (19 April) between 7-730am provided the telephone line where I am is OK.  The issue is that folks do not to panic, rather being forewarned is to be forearmed, so take a look at your mortgage documents and any marketing material received at the time and of course any statements made to you by the bank that you relied upon regardless whether those points are specifically covered in the mortgage documents or not.

If you want me to raise anything with me before tomorrow morning – no promises they will be covered - then may be email me privately to spare the group information overload?

Other issues:

As Marion pointed out there may be things in there that you need to keep abreast of such appropriate insurance etc notwithstanding the ECB tracker issue.

_"People should ensure that they insure their house at least for the value advised by the lender at the time the tracker mortgage was taken out. _[Marion]_"_  Presumably if you brought your house from 2004 onwards then by default (given the state of the market) you should be compliant! However this is the rebuild value, yet even that has dropped in price and not just land value. But do give this area thought.

On the separate point about the role of solicitors raised above - I wonder how many solicitors involved in conveyances actually thought about advising on the wording of mortgages as opposed to ensuring that good title passed to their client. An honest straw poll of lawyers might reap interesting and varied answers. Perhaps at the height of the boom some were just pushing conveyances through like a factory especially given the price war on fees? I am not convinced one would have recourse against the solicitor unless it could be established that the client specifically (or had a reasonable expectation engendered by the solicitor) that he/she was advising on each and every term & condition in the mortgage documents as opposed to those elements relating purely to the conveyance of property (and other matters material to the conveyance).


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## theclassic

twofor1 you are perfectly correct, all avenues should be pursued before resorting to any legal action of any kind: it should be the last resort in dispute resolution.
however I think people should be willing to use the court system - it is after all the final arbiter in all matters and the financial institutions are adverse to bringing people to court.

the prospect of a serious & protracted legal challenge by a large number of customers would not be welcomed, particularly when Irish financial institutions are trying to attract foreign investment.

the issue of banks offering different tracker options is correct however, the key point should be that in any other walk of life a contract is given meaning by what all parties undersand it to mean - in this instance the financial institution & the customer.

Marion & OakesP make very good points however, we the customers must make sure not to give the financial institutions and ensure all i's are dotted - the matter of house insurance is particularly relevant given the LTV's.


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## Marion

*House Insurance*

Just to clarify:

  I was a given a valuation for insurance by Halifax. It was detailed in letters and in my contract that this sum was to be insured and index-linked for the duration of my mortgage..

  Therefore, for me, It is irrelevant that house building costs have fallen by the latest figures on the SCS.ie site by up to 9% if I wish to hold onto my tracker. 

  One might be tempted to reduce costs according to the revised figures on the SCS site in order to obtain a lower insurance cost but this could have adverse effects in relation to holding onto the tracker.

  Marion


----------



## OakesP

Of course you would discuss it with the bank to avoid unilaterally disregarding whatever the banks' valuation and original requirements were.  But if someone did alter their insurance without reference to the bank which provided a fair and reasonable sum insured in the circumstances I am not sure that by such action by itself would occasion a breach of a condition in the mortgage contract which would allow the bank a fundamental right to change/repudiate other terms and conditions, such as the tracker issue.   A legal analysis would be required to get to the specifics here.  However I would repeat that that you should not alter your insurance without discussing with your bank and recording whatever they told you, especially if it cut across the face of the mortgage contract.


----------



## Paulk

Another article from the Independent re tracker mortgages:


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## frankor2

Re the trackers, PTSB did amend their loan offers some time ago for trackers and had a clause which read something like...should the ECB rate become an unsuitable reference rate the bank reserves the right to use another interest rate for the purposes of this tracker loan......(i cant remember the exact wording because I dont have it in front of me) but they were giving themselves a get out clause. I checked my own offer letter (ecb +.75) and it does not have this clause in it.
I think we can be sure that the banks will and are investigating all avenues to get out of these contracts....


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## MáirtInide

Does anyone find any get-out by UB given this, which in in the Loan Offer Document, which was signed by both of us, in the presence of our Solicitor,who also signed the document.

This was in a Special Conditions section of the Document.



> The rate of the Ulster Bank Flexible Mortgage tracks ECB rate with a margin which is fixed for the life of the Home Loan term. *The Margin for this Home Loan is ECB rate plus 0.95%*. This margin is dependent on the amount borrowed and the value value of the property to be mortrgaged.
> 
> The emphasis above is in the Document.


----------



## OakesP

MáirtInide said:


> Does anyone find any get-out by UB given this, which in in the Loan Offer Document, which was signed by both of us, in the presence of our Solicitor,who also signed the document.
> 
> This was in a Special Conditions section of the Document.


.

I should suspect that know one will want to offer advice -  neither am I - in a discussion board on an extract sitting in isolation from the rest of the mortgage document.  Why don't you think that the intention of the wording is clear?  May be you are looking for others with UB mortgages to share their opinion - which counts me out as I am with another provider.

Always note that you can never read a document in a fragmented manner.  Each clause hinges on other clauses within the document.  Perhaps go back to your solicitor and ask him/her if you have real doubt?  May be he/she might respond by saying that his/her role re the mortgage was limited to acting as a witness only though.


----------



## Tailspin

*Are my Bank of Ireland tracker conditions safe?*

Very interested in this topic as I have 2 large 6 figure trackers. If the banks moved me off my ecb +0.8% to something like 4% this would push us over the edge!

I looked at my Bank of Ireland loan documents and both of them state in the mortgage loan offer letter in "The Special Conditions" section. a) part (v)

" The interest rate applicable to the Loan is a variable interest rate an may vary upwards or downwards. The interest rate shall be no more than 1.05% above the European Central Bank Main Refinancing Operations Minimum bBid Rate ("Repo Rate") for the term of the loan.

Can anyone see any way that this sentance could be interpreted, allowing them to cancel the tracker, because I cannot.

I am also concerned about the possibility that if I moved out of my 2 bed apartment (as we are expecting our second child) and rented it out (as I cannot sell due to negative equity), that they could force me off my tracker. But again, I cannot see anything in the loan document that mentions that it is a loan for a ppr only, or that I need to inform them if it becomes an investment property. 

Again, does anyone know of any catch-all generic terms I should look out for or am I safe here too?


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## jinx9000

I checked my AIB agreement and it was very straight foward. I am on a 1.1% tracker for the lenght of my term (plus .75% for unpaid amounts).

there is no mention of it being raised to other refernce rates or anything to do with the value of the property affecting it (it is not an LTV tracker).

as mentioned above, they mention that you must have your house insured for the rebuild amount stated on the documents supplied to them and that this is your resposability

I am happy now in my situtation not to give this another thought!


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## senni

Please see below in Sundays Business Post ....Called  

BANKS SEEK LOOPHOLES TO ESCAPE TRACKER MORTGAGES

[broken link removed]

Banks seek loopholes to escape tracker mortgages 
Sunday, April 18, 2010 - By Kathleen Barrington 
Banks are examining the fine print of their tracker mortgages to see if there are any circumstances in which they can wriggle out of the promise to track the European Central Bank rate of interest.

A source close to one of the banks said it was looking at provisions in mortgage contracts that could get the banks off the hook in some cases. Some tracker mortgages sold to buy-to-let investors included a provision which entitled the bank to review its arrangements with the borrowers after five years, he said.

It might also be possible for the bank to revoke the promise to track the ECB rate if the borrower had breached the terms of the contract, for example if the borrower had missed repayments, the source said.

His bank was not the only one looking at ways of reducing the number tracker mortgages.

‘‘They are all at it,” he said, speaking on condition that his bank not be named. The issue of banks trying to wriggle out of the promise to track the ECB rate was raised by Peter Oakes of Compliance Ireland on RTE’s Morning Ireland last week, but several lenders denied contemplating any such move.



A spokeswoman for the Financial Regulator said it ‘‘would appear to be a matter of contract between the provider and the consumer, and customers should carefully examine their terms and conditions to see what is permitted under their contract’’.

She said the Consumer Protection Code states that ‘‘a regulated entity must ensure that all information it provides to a consumer is clear and comprehensible, and that key items are brought to the attention of the consumer. The method of presentation must not disguise, diminish or obscure important information.”


----------



## desperatedan

OakesP said:


> .
> 
> I should suspect that know one will want to offer advice -  neither am I - in a discussion board on an extract sitting in isolation from the rest of the mortgage document.  Why don't you think that the intention of the wording is clear?  May be you are looking for others with UB mortgages to share their opinion - which counts me out as I am with another provider.
> 
> Always note that you can never read a document in a fragmented manner.  Each clause hinges on other clauses within the document.  Perhaps go back to your solicitor and ask him/her if you have real doubt?  May be he/she might respond by saying that his/her role re the mortgage was limited to acting as a witness only though.



Thanks for your reply Peter.

I actually think the intention of the wording is quite clear, and I am confident UB will not attempt to undermine this contract.

No, I was just wondering in light of the general discussion, regarding Banks possibly/probably attempting to wriggle out of Tracker Mortgage Contracts, which most people thought were cast-iron, and quoting what I found in our Offer of Advance from UB, which we signed, etc etc. 

Remember, this was 5 years ago, and for most people a tracker seemed to guarantee some sort of cap on repayments, which at that time was what it was all about. 

To now possibly be faced with the prospect of Banks Legal Departments attempting to undermine contracts which people entered into in good faith, does seem to reek of the desperation within the Banking Community. 

It makes one wonder why they do not pull out all the stops to recover those "distressed loans" which were handed out to their Developer and Political friends, instead of expecting the Taxpayer and Citizen to bail them out through the NAMA mechanism.

Thanks again.

I'm Desperate Dan!!


----------



## Gautama

I've heard this before in relation to this topic: "if the borrower had missed repayments".

As a homeowner on a tracker mortgage, this bit is reassuring that the "buy-to-let investors" are being targeted.


----------



## OakesP

Tailspin said:


> Very interested in this topic as I have 2 large 6 figure trackers. If the banks moved me off my ecb +0.8% to something like 4% this would push us over the edge!
> 
> I looked at my Bank of Ireland loan documents and both of them state in the mortgage loan offer letter in "The Special Conditions" section. a) part (v)
> 
> " The interest rate applicable to the Loan is a variable interest rate an may vary upwards or downwards. The interest rate shall be no more than 1.05% above the European Central Bank Main Refinancing Operations Minimum bBid Rate ("Repo Rate") for the term of the loan.
> 
> Can anyone see any way that this sentance could be interpreted, allowing them to cancel the tracker, because I cannot.
> 
> I am also concerned about the possibility that if I moved out of my 2 bed apartment (as we are expecting our second child) and rented it out (as I cannot sell due to negative equity), that they could force me off my tracker. But again, I cannot see anything in the loan document that mentions that it is a loan for a ppr only, or that I need to inform them if it becomes an investment property.
> 
> Again, does anyone know of any catch-all generic terms I should look out for or am I safe here too?


 

Tailspin - does your contract with BoI go on to say "In the event that, or at any time, the Repo Rate is certified by the Lender to be unavailable for any reason the interest rate applicable to the Loan shall be the prevailing Home Load Variable Rate"?  Also do you have a clause 6(c) which talks about EURIBOR?  

I read a BoI contract for a friend last week and will post a more detailed note later today.  Just curious if you have the same wording.


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## OakesP

Charlie Weston in the Independent (24/04/2010) wrote a follow-up piece on this story at http://www.independent.ie/business/personal-finance/watchdog-alert-on-tracker-home-loans-2147218.html.

The story covers a number of points:

1) Regulator called upon by Chairman of the Consumers' Association of Ireland James Doorley to probe mortgage lenders to make sure they are not attempting to encourage homeowners to give up tracker mortgages.

2) Financial Regulator stating on 23/04/2010 that lenders were required to act honestly and in the best interests of customers. "Our firm view is that no bank should offer incentives for tracker mortgage customers to switch to less favourable options," the spokeswoman for the regulator said.

3) Comments by mortgage broker Karl Deeter saying most tracker contracts were based on the mortgage being a set percentage or lower of the value of the house. That most lenders based their tracker offers on the loan-to-value ratios. He is reported saying these lenders could seek to renegotiate the mortgage rate to reflect the higher value of the loan relative to the value of the home, he said. Lenders could ask consumers to pay down money on the mortgage to bring the loan to value back in line with the original agreement, or force people to switch to a variable rate loan (see link above for context of quote).

[OakesP comment - I have never seen a NIB mortgage contract. I was _passed a copy of a BOI tracker contract and its states that as a condition precedent that ‘A valuation (including a photograph) of the Property for mortgage purposes showing the valuation in an amount of not less than Euro XXXXX etc”_. To my mind this is a state of fact that had to apply before the loan was advanced and does not appear to be a continuing obligation. I then looked at the ECB interest rate clause which copied the language provided by ‘Tailspin’ above - _“The interest rate shall be no more than 0.XX% above the European Central Bank Main Refinancing Operations Minimum Bid Rate (“Repo Rate”) for the term of the Loan.”_ The same clause goes on to state “_In the event that, or at any time, the Repo rate [sic] is certified by the Lender to be unavailable for any reason the interest rate applicable to the Loan shall be the prevailing Home Load Variable Rate_.” Very interesting eh? I wonder what the bank’s definition of ‘unavailable’ is? The pessimist in me does not lead me to conclude that that the bank would seek to interpret this word in a narrow fashion, especially since it has sole discretion to make the decision. 

For those interested the Repo Rate is at http://www.euribor-rates.eu/euribor-rate-1-month.asp and the ECB rate is at http://www.ecb.int/stats/monetary/rates/html/index.en.html. In particular, take a look at the divergence between the two rates in early 2008 and then note the following clause I located buried in the fine print – “_Notwithstanding anything else provided in this Offer Letter, the varied applicable interest rate shall never, in any circumstances, be less that 0.1% over the one month’s money at the Euro Inter Bank Offerred Rate (Euribor)._”

Two things strike me: Firstly, the bank would have a hard time arguing that the Repo Rate is not available for so long as it is published by the ECB and/or secondly, it is only when there are times of divergence between the ECB and EURIBOR (which is plausible based on historic movements), that those with similar wording in contracts may need to be concerned. Yet as I say above, the BOI states it has sole discretion in deciding when the Repo Rate is not available. I’ll let the question sit out there as to what ‘unavailable’ means. The Financial Regulator has signaled that banks need to bolster their finances and that consumers should expect interest rate rises independent of the ECB. The regulator did not qualify his statement before the Committee so one presumes he was referring to SVRs and not ECB trackers. Is it likely that some banks might be buoyed by the regulator’s address to the Committee and seek to see how far they can push the boundaries?

I raised this issue on RTE Morning Ireland back on 15 April 2010, see http://www.complianceireland.com/RTE-Morning-Ireland-Peter-Oakes-Compliance-Ireland-Matthew-Elderfield-14-April-2010.ivr) and later on Newstalk interview on 19 April 2010 at http://www.complianceireland.com/Newstalk-Peter-Oakes-Compliance-Ireland-ECB-Tracker-Mortgages-20100419.mp3). Since that time, together with Charlie Weston’s separate stories about Halifax/BoSI, a lot of media and industry commentators have followed up the issue. This is good honest and necessary debate. And hopefully the IBF and/or the banks will move to say that all this is all a nonsense and that they commit to honouring ECB trackers regardless of changes to LTVs or borrowers missing payments who in good faith seek to honour the long term commitment to the mortgage despite short-term problems. We say that a pet is for life, not just for Christmas. Same applies to both parties to a mortgage contract especially when the taxpayers (the borrowing parties) have bailed out the banks (i.e lending parties).

3) A spokesman for the Irish Banking Federation said it was its information that members were not trying to exploit loopholes in tracker contracts to push through rate rises.

[OakesP comment – there is no direct quote provided in the article from the IBF. However the words attributed to the IBF are interesting – what is the IBF’s information based upon? (1) A response to a direct question asked by it of its members (and if so which banks were asked and which ones answered clearly) or (2) the fact that no one is asking questions and that none of the banks are offering up information freely to the IBF and others?]

I have to say I like the title of Charlie Weston’s article - *You'd have to be crackers to give up your trackers**. Short, succinct and to the point. One of those phrases up there with “I don’t know what a tracker mortgage is’ See http://www.independent.ie/opinion/columnists/charlie-weston/charlie-weston-youd-have-to-be-crackers-to-give-up-your-trackers-2141861.html*

*Peter Oakes*


----------



## Tailspin

OakesP said:


> Tailspin - does your contract with BoI go on to say "In the event that, or at any time, the Repo Rate is certified by the Lender to be unavailable for any reason the interest rate applicable to the Loan shall be the prevailing Home Load Variable Rate"? Also do you have a clause 6(c) which talks about EURIBOR?
> 
> I read a BoI contract for a friend last week and will post a more detailed note later today. Just curious if you have the same wording.


 
Hi Peter,

Yes, both parts are in my tracker contract.  My reading of "unavailable" is that if for some unforeseen reason, the ECB actually ceased to operate, or was restructured in some way as to cause it not to actually quote a repo rate.  I don't think our circumstances now qualify as this rate is available.  

Clause 6 (c) states "notwithstanding anything else provided in this Offer letter letter, the varied applicable interest rate shall never, in any circumstances, be less than 0.1% over one month's money at the Euro Inter Bank Offered Rate (EURIBOR).

Does this clause in any way contradict the Special conditions regarding the repo rate?  Can anyone explain what it means in plain English - have looked up one month Euribor and it is currently 0.4% (with 12 month at 1.226%). If there is any contradiction here, this was certainly never brought attention to me.


----------



## OakesP

Tailspin, way back in February 2008 the 1 month Euribor was 4.239%. The ECB was 3% (having not moved since June 2007). I am quoting the rates as per the relevant weblinks in my previous posting.

The wording of clause 6(c) is “_Notwithstanding anything else provided in this Offer Letter, the varied applicable interest rate shall never, in any circumstances, be less than 0.1% over the one month’s money at the Euro Inter Bank Offerred Rate (Euribor)._”

Let's assume someone has a 0.8% plus ECB tracker. As at February 2008 the interest rate paid by the borrower would have been 3.8%. At the same time clause 6(c) appears to say that the applicable rate would have been 4.339% (Euribor plus 0.1%). It seems to me – but I could be reading this wrong – that the borrower was underpaying an amount of 0.539% pa during the time this divergence existed. 

Today the ECB rate is 1% and the last daily Euribor 1 month amount was - as you point out - 0.405%. In these circumstances clause 6(c) cannot kick in. 

I cannot imagine a bank seeking to claw money from a borrower for short term divergences which make clause 6(c) operate. I have not looked at the historical differences to perform an overall plus or minus figure. I don't see any need to at this time. I just wanted to raise the issue about fine print in contracts which seek to oust the upfront special conditions which banks draw our attention to (as opposed to the fine/small print).

Peter Oakes


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## Tailspin

Thanks Peter, this helps.  By the way, if Euribor rates are falling as they seem to be, does that reflect a reduction in risk over time in interbank lending?  What do you think Bank of Ireland cost of funds would be?  Is it possible that over the next couple of years, that BOI's cost of funds might revert back towards the ECB rate, and allow banks to make a very modest margin on this lending?


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## OakesP

Not an area for me to comment upon with any past professional experience.  May be ask that on www.irisheconomy.ie


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## MentalNote

I think this is pretty much a re-hash of what has already been said int his thread.



			
				IrishTimes said:
			
		

> *MORTGAGES:* Financial institutions say they are  losing money on tracker mortgages, and could try to force borrowers on  to higher rates, writes  *FIONA REDDAN
> *
> IT HAS BEEN A turbulent time for homeowners. On top  of collapsing house prices and negative equity, mortgage holders are  also facing interest rate hikes. Last year people who were on fixed-rate  mortgages were stuck paying the price of high interest rates while,  more recently, those on variable rates have found themselves staring  down the barrel of higher repayments.
> Now, those with tracker  mortgages are starting to look nervously at the terms and conditions of  their loan documentation, fearful that banks may look for “get out of  jail” clauses to rescind these attractive products.
> “Banks are  looking for every chance to get out of tracker mortgages,” says Frank  Conway, a director with the Irish Mortgage Corporation. That sentiment  is echoed by Karl Deeter, operations manager with Irish Mortgage  Brokers, who says banks are starting to “either increase inducements or  look for loopholes” to escape their trackers.
> There is no doubting  the attractiveness of trackers for homeowners – repayments on a  €300,000 mortgage over 30 years cost €231 less a month on a tracker (ECB  plus 0.75 per cent), compared to the standard variable rate (3.23 per  cent). As Deeter notes, trackers offer a price promise, “something rare  in this day and age”.
> Bank of Scotland, which introduced tracker  mortgages into Ireland, is offering borrowers more than €1,000 if they  switch lenders and the expectations are that the other lenders may  introduce similar incentives, or look to invoke a clause in borrowers’  contracts which would let them switch people on to more expensive rates.
> The  banks argue that trackers are uneconomical because they now have to  borrow funds at a higher cost than they are lending them out at (to  those on tracker mortgages). Although three-month Euribor rates (the  rate at which banks themselves borrow money) have fallen dramatically  from their highs of 2008, down to nearly 0.5 per cent, “very, very few  banks are able to fund themselves at Euribor”, says Oliver Gilvarry,  head of research with Dolmen Stockbrokers. Irish banks in particular pay  considerably more for funds.
> Gilvarry adds that trackers look  expensive when compared with deposits, given that banks are sometimes  paying as much as 3 per cent for deposits, while lending out trackers at  about 1.75 per cent (ECB plus 0.75 per cent). He also notes that banks  pay very little interest on funds deposited in current accounts, so  there could be a substantial margin on what they make on these funds,  and what they lend out in trackers. So, the banks’ argument that  trackers are costing them too much might be misleading.
> Nonetheless,  speculation is mounting that the banks may step up their action on  trackers. According to Deeter, the most likely action banks might take  is on the loan-to-value (LTV) covenant inherent in many tracker  contracts. If, for example, you got your tracker on the basis that you  had an LTV of 80 per cent, whereby the mortgage represented only 80 per  cent of the value of the property, the bank could look to switch you on  to a higher rate. They would do this saying that because of the decline  in house prices, your LTV may now be closer to 100 per cent, and so you  might no longer qualify for the lower rate. “It won’t be fair, but it  would be a fair argument that they could present,” says Deeter.
> And  don’t think that administrative issues could stop the banks from  requesting new valuations of properties on their loan books. “If I was a  banker, I’d say, we’ve looked at property prices in your area, we think  they have declined by 40 per cent, we’ll give you three months to come  back to us with a valuation,” says Deeter. “The banks will offset the  work on to the individual.”
> If the banks were to go down this  route, homeowners would then have two options: either inject a lump-sum  to pay down the mortgage to the required level and stay on the lower  tracker rate, or be switched to another rate, which would probably be a  tracker in a higher LTV band.
> While Conway believes most tracker  contracts are “very tight”, and thinks it unlikely banks could look to  change their terms and conditions, he warns that homeowners might  nonetheless “open up their own vulnerability”.
> “Homeowners should  remember that they needn’t provide the banks with any reasons,” warns  Conway. For example, if you look to extend an interest-only period, the  bank may only do so if you give up your tracker.
> “The bank will  say ‘we’ll renegotiate’ but will do so out of the tracker mortgage,”  says Conway, citing the example of an investor who was given two options  by the bank when he asked for an extension of an interest-only period:  either switch to a fixed or variable rate and pay interest only, or  stick with the tracker but pay both interest and capital.
> Homeowners  looking to rent out their property should also be aware that this may  come at the cost of their tracker, because banks may look to switch such  customers on to investment property mortgages. Given that such rates  now start at more than 4 per cent, it would mean a dramatic increase in  funding costs for those on trackers, so those interested in becoming  landlords should first check the terms and conditions of their mortgage  contract.
> Not only that, but any violation of the mortgage  contract, such as going into arrears, or allowing a life assurance or  home insurance policy to lapse, may give the bank reason to move on your  tracker.
> And, if you’re looking to top up your mortgage, you  might find that the bank will take the opportunity to draw up a new  contract and move you off the tracker rate. Instead, ask the bank to set  it up as two different loans – so you won’t lose your tracker rate on  the older part.
> Remember that if you’re eyeing up some of the  deals available on properties around the country, moving house will mean  you will lose your tracker, as your mortgage ends with the sale of the  house.
> For homeowners interested in availing of incentives such as  the Bank of Scotland offer to switch, the advice is to think carefully.  “You shouldn’t give up your tracker unless you have a really strong  argument for doing so,” says Deeter, while Conway urges homeowners to  “protect it at all costs”.
> While it is expected other lending  institutions might follow the Bank of Scotland and incentivise mortgage  holders to leave their books, the issue remains as to which bank will  take them on.
> With so many borrowers in negative equity, and LTVs  of more than 100 per cent, there simply “mightn’t be anywhere for them  to go”, says Conway.


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## eltel1979

*Irish Independent 4th May: *
*Borrowers warned to reject €15,000 offer to quit trackers* 

BANKS desperate to clean up their balance sheets could soon start trying to tempt mortgage holders to go elsewhere by offering them up to €15,000 off their home loan.
But consumers have been advised not to touch these "break-deals" unless they are offered more money.
The IBA said lenders were quietly trying to protect their capital by tempting borrowers to switch to other providers.
Paul Kinane of the IBA said lenders were particularly keen to get people to give up trackers, which are loss-making for them.
"Not only do many banks no longer want new customers, some don't even want their existing customers anymore," he said.
This situation could lead to a borrowers' market, in which mortgage holders will be able to negotiate lucrative deals with their banks in return for ending the relationship.
But Mr Kinane warned: "Consumers need to be extremely vigilant as experience would indicate that you get nothing for nothing as far as the banks are concerned."
He said that a homeowner with a €300,000 variable rate mortgage may be tempted by having 3pc to 5pc of this loan written off, which would amount to a discount of between €9,000 and €15,000.
The IBA said it believes tracker customers would need a break-deal offer above 25pc (€75,000 on a €300,000 mortgage) to make it worth their while. He said that customers who dealt directly with the banks could have significant pressure brought to bear on them to change their terms.
"We are urging mortgage holders not to feel pressured into changing their loan terms or switching to another provider. People should see this as an opportunity to perhaps secure a better deal in the market," Mr Kinane said.
*Switch*
He dismissed a recent offer from Bank of Scotland/Halifax of €1,000 to those who want to switch away from the bank as a "low ball offer". 
The bank is closing and will no longer offer top-up loans, prompting it to advise customers with a valuable tracker to switch the entire home loan to another lender to avail of a top-up.
"It is likely to be the start of similar campaigns, particularly from those lenders keen to exit the Irish market. 
The Consumers' Association has called on the Financial Regulator to carry out a probe of mortgage lenders to make sure they are not attempting to encourage homeowners to give up tracker mortgages.
The association's chairman, James Doorley, said lenders were under a statutory obligation, under the regulator's consumer protection code, to act in the best interests of customers. This meant that any attempt to incentivise customers to give up their tracker would be a breach of the code. Lenders are attempting to get people to give up their trackers when they get into arrears and need to restructure their mortgage.
A spokeswoman for the Financial Regulator has also said that lenders were required to act honestly and in the best interests of customers.
"Our firm view is that no bank should offer incentives for tracker mortgage customers to switch to less favourable options," she said.
- Charlie Weston 
_Irish Independent_


----------



## Carmel

*reason to give up your tracker*

Hi Deelrover
I am in that situation. We have a tracker at ESB plus 0.51% at the moment, but have a second child on the way and feel that we need to move house to get more space. I changed job last year and improving my commute would also be a consideration. But the thought of losing our tracker is a major factor in putting off the move.

I had thought that my existing mortgage lender might be willing to offer a good variable rate on the next mortgage if I tried to negotiate on the basis that we would be giving up the tracker, but perhaps that doesn't make sense if the tracker will be paid off at the lower rate anyway if the house is sold?

Would we be crackers to give up our tracker?

C


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## deelrover

Carmel,  Same issue's as you have with growing family. Mortgage with UB,thye were only too happy when I went in to them about moving house and having to re apply for a new mortgage. Only variable and fixed rate mortgage offers so even though the cost of upsizing was only 50K we decided against it for the while due to the loss of the tracker mortgage.


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## Howitzer

MentalNote said:


> I think this is pretty much a re-hash of what has already been said int his thread.


[broken link removed]



> While some of these offers appear very attractive in the current climate, we would urge caution and suggest seeking independent financial advice before considering any offer from your bank. A E300k variable customer may be tempted by a 3pc-5pc (9,000-15,000) discount, but we believe that trackers customers would need a break-deal offer north of 25pc to make it worth their while. This is often a difficulty when customers deal directly with the banks as significant pressure can be brought to bear to change their terms. Because of their experience in and knowledge of the area, brokers often negotiate much better deals that those originally offered


 
Just to note that the advice given in this link comes from the Irish Brokers Association. Whilst it's correct to say that the offer from Halifax/BOS is a terrible, self serving low ball offer the advice from the IBA isn't much better. 

Some of the mortgage brokers on the site may correct me but it's my understanding that if a mortage brokered by a member of the IBA is paid off early / switched, then the commission paid out to that broker is redeemed. In many the commission is paid out in instalements after a number of years, and again switching nullifies these payments.

So what are the IBA doing here by saying you should be looking for 25% of your outstanding mortage as an incentive to switch? Well, in my opinion, they may be setting people's expectations way way too high so that they do not lose their commission.

A friend of mine came in to some money at the start of the year. She has a tracker of ECB +.65% on a mortgage of around 200K. She was going to pay off the mortgage (deposit held in different bank). I advised then to wait till the end of the year when I reckoned she'd get 10-15K off the principle. Advising someone they'd get 25% (50K) off that amount just isn't realistic and I'd question the motivation of anyone giving this advice.


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## jinx9000

the article mentions 25% "to make it worth their while".

that advice stands as good!


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## Howitzer

jinx9000 said:


> the article mentions 25% "to make it worth their while".
> 
> that advice stands as good!


Well here's how I make my calculation.

The average life of a mortage is 7 years. After that you switch / move / release equity to build an extension, all of which would be used to end the tracker. 

Most of these loss making trackers were given out in 05-07. Suggesting an average of 3.5 years remaining.

If you move to a variable you'll, on average, pay 2% extra in interest. 

2 x 3.5 = 7% of your outstanding principle (15K from 200K).

Banks will make a similar calculation to this when deciding what to offer you to break your tracker. It'll be the exact same formula they used when calculating breakage fees for those who wanted to go from a Fixed to Variable. 

25% is not realistic and no underwiter / actuary would agree to it. I'm calling shenanigans on the IBA advice.


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## NorfBank

Howitzer said:


> Some of the mortgage brokers on the site may correct me but it's my understanding that if a mortage brokered by a member of the IBA is paid off early / switched, then the commission paid out to that broker is redeemed. In many the commission is paid out in instalements after a number of years, and again switching nullifies these payments.



There is usually a 3 year clawback.
In reality BOSI have not been lending for the past 2 years so most of their mortgage book will be 2+ years old.
If your mortgage is less than 3 years old, there is a high probability of negative equity so you may not be able to switch in any case.
All of these factors would make the effect of commission clawback on brokers negligible.

The 25% is a soundbite from the IBA and it looks like it has worked. They will be delighted to get this coverage.

www.moneybackmortgages.ie


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## jinx9000

there is not one person reading this thread or even interested in this topic with 7 years left!

there home free in my book! let's keep this relevant to the people who bought in 2000-2008!


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## Howitzer

jinx9000 said:


> there is not one person reading this thread or even interested in this topic with 7 years left!
> 
> there home free in my book! let's keep this relevant to the people who bought in 2000-2008!


You have mis-read my post. Statistically mortages only last 7 years before they get churned.


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## jinx9000

Howitzer said:


> You have mis-read my post. Statistically mortages only last 7 years before they get churned.



My apologies. I think we can safely say that in the future that figure will be revised up either due to an inabilty from the bank to let you break from the tracker ie no new mortgage approval for bigger house/ top up or your relucentence to allow youself to give up the tracker.

My guess is that the buyout option will only come after the ltv mortgage holders are hung out to dry by the banks on their rising ltv rates when the market bottoms next year.


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## OakesP

*Herald article 4 May with IBA comments and others*

[broken link removed]


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## galleryman

QUestion.

I'm on an AIB ECB + .6% Tracker.
I wrote to the bank in May 2007 to instruct them to move me to that <50%LTV rate when my 1yr fixed rate finished a week or so later.  I then received a simple letter from the bank a week later stating what my new repayment schedule would be and I have been on that tracker rate ever since.  I did not receive any T&C document or official notification that I was on that tracker in the post. However they obviously received my written instruction to put me on that rate at the time and acted upon it and so I still have the tracker. I am extremely fortunate to still qualify for the <50% LTV status so that is not an option for the bank. 
Is this lack of a T&C document a good or bad thing for me?


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## summersun

Paulk said:


> Article in today's Independent re tracker mortgages:
> 
> http://www.independent.ie/business/...eking-to-alter-tracker-mortgages-2140419.html



if Mr Weston is writing about it, no smoke without fire, NIB were writing to tracker clients confirming their mortgage protection and fire insurance policies some time ago, 

I would not rule out NIB stating there is now a material change as we have not received your confirmed policies: welcome to your new variable product


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## serotoninsid

summersun said:


> I would not rule out NIB stating there is now a material change as we have not received your confirmed policies: welcome to your new variable product


Yes - they were writing to mortgage holders re. insurance details.  Just wondering if this was selective ie. just tracker customers??


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## bettyboo

We received one of those letter re. Ins details from NIB and yes, we have a tracker mortgage with them.


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## txirimiri

Great thread. I am particularly grateful to Marion for pointing out that unless your house is insured for the rebuild value stated in the original valuation report, it could be null and void. Am now frantically scrambling around to find the copy of the valuation report to double check, but as we could not have drawn down the mortgage without having proof of insurance to that value and our house is now valued for more than the original amount I think we could be safe.

Where we are not safe is on the LTV. Checked the mortgage docs and the LTV ration (50%) is explicitly mentioned. House is now nowhere near worth double the outstanding amount on the mortgage. It would take an injection into the mortgage of more capital than we have in savings to bring it down to 50% and we were planning anyway to spend some savings doing the place up on the basis that as we can never move without taking a giant whack on a new mortgage rate, we may as well do some improvements as we will be there for the long haul! Should we think again????


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## txirimiri

Sorry, meant to say our house is INSURED for more than the what it was insured for when we took out the mortgage, not VALUED for more!


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## csirl

> Great thread. I am particularly grateful to Marion for pointing out that unless your house is insured for the rebuild value stated in the original valuation report,


 
Is this really the case? Surely the house must be insured for the rebuild value at any point in time? Otherwise the house isnt insured correctly. In any event, an insurance company will only pay the rebuild cost at the time the rebuild is done as you cannot profit from insurance. 

In non-recession times, the rebuild costs will go up with inflation over time. There will come a point in time when they will exceed the amount to be repaid on the mortgage and ultimately will significantly exceed the original value of the house - remember that by year 24 of a 25 year mortgages, the original house pricwe will only be a fraction of the value of the house and rebuild costs will be multiples of what they were 24 years previously.

I would assume that the same holds true in the current deflationary circumstances. That if rebuild costs are lower, then the rebuild figure in the insurance premium will decrease.


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## txirimiri

Marion's point was I think that the mortgage contract is contingent on the house being insured at a minimum for the cost of the rebuild as specified by the valuation report.

Its possible that either a homeowner might have let their insurance lapse since taking out their mortgage or that if they took their mortgage out at the height of the boom and have subsequently renegotiated their insurance, the current rebuild cost has been estimated by the broker as necessary to adequately insure the house would be lower than that in the valuation report (for instance, we took our tracker out in 2007 and insured for a rebuild cost of almost 500 grand - I doubt it would actually cost that now and I imagine I could find a broker to quote a lower rebuild cost - but Marion's point is that that could render the contract void, thereby giving the bank room to wiggle out of their side of the contract.

Of course you are right that in 25 yrs time, the actual rebuild cost would prob be higher than that quoted in the valuation report, but the issue on this thread is not whether your house is adequately insured for the actual rebuild cost if it burnt down or whatever, but whether it is adequately ensured to comply with the conditions set out in the mortgage agreement


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## Marion

txirimiri said:
			
		

> but the issue on this thread is not  whether your house is adequately insured for the actual rebuild cost if  it burnt down or whatever, but whether it is adequately ensured to  comply with the conditions set out in the mortgage agreement




Txirimiri: You are absolutely correct. We are concerned with ensuring that our trackers are safe.

But of course we are also concerned that a house must be insured for its replacement value.

 What is interesting/disturbing about this for me is that I have found out that I have been underinsuring my house.

  I re-mortgaged just a couple of years ago and I spoke with my existing insurance company at the time and gave all relevant details regarding my extension size etc.

  I re-insured my house as per my mortgage provider’s figure for the re-mortgage.

  I recently checked insurance premium costs with different companies and it seemed to them that I was under insured by a significant sum. My insurance is due for renewal and I asked my existing company to double check. I am adequately insured in relation to my mortgage company.  

  But, they also stated that I am currently underinsured in relation to the replacement value of my house. 

  This is why I specified “at least” in my post above.


  Marion


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## serotoninsid

Marion said:


> What is interesting/disturbing about this for me is that I have found out that I have been underinsuring my house.


Until your original post on this thread, I thought I was doing the smart thing - by reducing rebuild cost to a realistic level in light of the slump to save a few extra quid on insurance.  It never occurred to me that my bank could claim I was in breach of contract and kick me off tracker-rate.
Have full rebuild cost back on policy now


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## RMCF

Something that just came to me the other day and which might be worth bearing in mind for those on trackers.

The AIB take my mortgage payment each month from an account which I keep separate from my current account. Can't figure out why I did this originally, probably just for tidiness.  

So each month I move money from current account to my 'mortgage' account. I tend to try to have 2 months payments in it at any one time.

The OH said to me the other day about always making sure that I have plenty of money in it, so that I don't default on a payment.

This made me think. If I did miscalculate and forget to put a payment in to cover the mortgage coming out one month, could they use this as a way to get me out of the tracker? Could they say I broke the contract?


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## txirimiri

serotoninsid said:


> Until your original post on this thread, I thought I was doing the smart thing - by reducing rebuild cost to a realistic level in light of the slump to save a few extra quid on insurance. It never occurred to me that my bank could claim I was in breach of contract and kick me off tracker-rate.
> Have full rebuild cost back on policy now


 
Marion - I owe you a bunch of flowers/bottle of champagne .... Just looking into renewing my house insurance. I asked the broker to recalcuate the current rebuild cost of the house using the standard formula for 2010 and it came to just over half the rebuild cost stated on the original valuation report! So if it hadn't been for this thread I would have merrily asked her to reset the rebuild cost to the new level, been delighted with myself for saving perhaps 150/200 quid for the year little suspecting that I was leaving myself open to loosing my dearly-beloved tracker ...


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## thedarkone

*Households facing new property tax in Budget*

Reported in today's Indo: 

w ww.independent.ie/national-news/households-facing-new-property-tax-in-budget-2230836.html

"Households facing new property tax in Budget
...it is understood self-assessment would involve homeowners  getting professionals to value their properties"


What a nice, easy way for the banks to get us off trackers and avoid the hassle of getting everyone to conduct valuations to see if they satisfy the LTV!  Nice one, Mr Cowen, you've saved the banks, now saving them hassle...


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