Key Post Bank of Ireland/ICS now allow you move and keep your tracker for 5 years

https://personalbanking.bankofireland.com/borrow/mortgages/starter-tracker-for-mover/

This has been cut and pasted from a release I got from ICS. I'm presuming that Bank of Ireland are offering something similar.

From 6th June, ICS will introduce a new Mover Proposition for our Tracker Mortgage Customers – it’s called the ‘Starter (5 years) Tracker for Movers’.
This proposition will facilitate customers to move to a new home more suited to their needs by providing them with a tracker product on their new mortgage (for the outstanding amount of their previous homeloan mortgage), for a period of 5 years, at 1.3% over their original tracker margin.
This proposition uses existing processes and procedures for mover customers in positive equity. For mover customers in negative equity, please contact your ICS Building Society regional manager as each case will be considered on its individual merits.
This product will facilitate existing ICS tracker customers to move to a new home and have a tracker product on the new mortgage:
　
a)For the outstanding amount of customer’s previous tracker mortgage,
b)For a period of 5 years,
c)With an additional margin of 1.3%, (i.e. ECB + existing margin + 1.3%).
d)Following expiry of the tracker rate, customers will have the option to choose between our existing customer variable or fixed rate available at that time.
e)The proposition is available to existing ICS Building Society tracker customers.
f)Any additional balance of the new mortgage will be offered at new business rates - fixed or variable,
g)New business credit criteria will apply (including new term if required).

While it's good to have clarity on the question "Will I lose my tracker if I trade up?", I don't think this is a great product as you're giving up your tracker after 5 years and even during the 5 years, you're paying an extra 1.3% per year. Its expensive in my opinion.

Hi Liam

Before this, some people were actually trading up or moving and losing their tracker completely.

I think it probably strikes the right balance. BoI are under no obligation to offer this product and the customer is under no obligation to accept it.

Someone with ECB + 1% is paying 1.5% today.
For the next 5 years, they would be paying 2.8% which is a significant reduction on their SVR of 4.55%

The Ulster Bank product is a bit too generous. If I was a shareholder in UB, I would not offer it.

LDFerguson said:

While it's good to have clarity on the question "Will I lose my tracker if I trade up?", I don't think this is a great product as you're giving up your tracker after 5 years and even during the 5 years, you're paying an extra 1.3% per year. Its expensive in my opinion.

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Is it not a good product as it allows people who need to to move?

Bronte said:

Is it not a good product as it allows people who need to to move?

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Hi Bronte,

The product as described in the ICS release is only for those in positive equity, although they do say that they will consider negative equity movers on a "case by case" basis (and perhaps on different terms - this isn't made clear).

If you're in positive equity, there's never really been any restriction on you moving - just sell your house and buy another. This just allows you to keep a tracker for the first five years thereafter - but a tracker at 1.3% per year higher than what you were paying and you lose your tracker thereafter.

I suppose if you need to move for practical reasons this is better than giving up your tracker immediately.

LDFerguson said:

I suppose if you need to move for practical reasons this is better than giving up your tracker immediately.

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Personally I don't see the obsession with people keeping their trackers. You move if you need to and can afford it and don't regret losing the tracker. It was great while it lasted etc.

I can only see them NE mortgages if it's a civil servant etc.

But actually those trackers probably meant originally people borrowed too much as the rate was so low. It's all swings and roundabouts.

LDFerguson said:

While it's good to have clarity on the question "Will I lose my tracker if I trade up?", I don't think this is a great product as you're giving up your tracker after 5 years and even during the 5 years, you're paying an extra 1.3% per year. Its expensive in my opinion.

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Its nothing to write home about but its the complete loss after 5 years that really takes the low grade lustre shine from it.

Can't say I'd be comfortable advising a client to take up a product like this. You have higher margin for five years then lose it totally and then must accept whatever the bank determine they want to charge? The fixed nature of the margin is part of what makes trackers so good, not the differing margin (what I mean is that even if it was ECB+3.75% it's better than an unpredictable SVR).

Given that you normally have to have a deposit, even for a negative equity mortgage, then why not just take out a new mortgage? Rent out the first place (if you don't want to do this whole argument falls) and view the lower interest as a reduced carry cost on the asset and the repayments act as forced savings.

Has anyone heard any more from PTSB on their proposals - when the BOI story broke , there was talk of PTSB coming out with their offering in June - although when i called PTSB, they indicated that they had made no such announcment and this was mere speculation?

MortgageGuy said:

Given that you normally have to have a deposit, even for a negative equity mortgage, then why not just take out a new mortgage? Rent out the first place (if you don't want to do this whole argument falls) and view the lower interest as a reduced carry cost on the asset and the repayments act as forced savings.

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Very interesting point. But would you qualify for the full mortgage you are looking for? I would guess that if you do the numbers, it wouldn't work for many people.

And overall, you would probably be increasing your exposure to property and borrowing beyond what you would be comfortable with.

There is also the possiblity that BoI will try to kick you off the tracker if you rent out the house.


If you have 30 years left on your tracker, losing 25 years of it would be a lot.

If you have only 15 years left, losing 10 years is not too bad.

Brendan

This is not a great solution unless you absolutely have to move e.g. if you are in an apartment/small house and have a family and want more space or if you are in a bad location or have to move for work reasons. These are all special cases rather than the norm.

Otherwise, why would you give up your tracker without this type of product having a chance to evolve over time. Banks will have to do business in the future and they are much better off getting you to upgrade and get the SVR on the top up than have you sitting in the same home paying just the tracker rate. By selling your own home, the buyer will also be taking out an SVR mortgage so the banking industry is a winner.

There is a lot more to come here.

I have just heard Bank of Ireland advertising this on the radio, so they seem anxious to push out this new tracker product.

Has anyone actually applied for it and succeeded in getting it?

Brendan

Brendan - were they advertising this for negative and positive equity mortgage holders or only the latter?

I just caught the end of the ad so I don't know.

A fairly poor take up of the Bank of Ireland Tracker mover product

From the Oireachtas Finance Committee

Deputy Michael McGrath:

I wish to raise the issue of many home-owners who, in a sense, are trapped in the property they are in because they are in negative equity. They might have a tracker mortgage rate. Bank of Ireland introduced a product in April 2013 for people on tracker mortgages who wish to move so that if they qualify for a mortgage they can keep the tracker rate plus 1% for five years on that original portion of the mortgage and any additional mortgage is at the variable rate. The uptake seems to be quite poor. Bank of Ireland has approved about 400 cases and about one third have been drawn down. Would Bank of Ireland be willing to review that product to see if it could be made more attractive? Surely from the bank's point of view, if it is lending additional money to creditworthy customers that money will be at a variable rate, so it will be making a profit on that and clearly it would be transformative for many people in that situation. Could he comment on that and a related issue of people in negative equity who may be trapped in apartments with two or three children, a completely unsuitable environment for such families? What help is the bank giving to people in that situation to move if they can qualify for a mortgage?
Mr. Richie Boucher: I will ask my colleague to take that question.
Mr. Liam McLoughlin: We introduced that product in April 2013 in response to extensive customer research on the needs of customers in tracker mortgages. There have been over 400 applications under the standard terms, which are a five-year product with a 1% uplift in rate. The reason, we feel from customer feedback, that only one third have drawn down is that they are struggling to find the right house for themselves. They have approval and that approval stands, but they cannot find the appropriate property to move into, so it is a supply challenge in the first instance. We are not getting feedback on the product itself. There are different products in the marketplace from other suppliers that have been launched in the second half of 2014 but they are all about the same. It is predominantly a supply issue, particularly in the Dublin area.
On negative equity, we also introduced last year negative equity trade up-trade down for customers and those products are of a similar nature and have proved to be quite popular for customers who are in that situation but we will give negative equity loans in those situations where customers are in difficulty up to 175% loan-to-value, LTV.

Brendan Burgess said:

There have been over 400 applications under the standard terms, which are a five-year product with a 1% uplift in rate. The reason, we feel from customer feedback, that only one third have drawn down is that they are struggling to find the right house for themselves. They have approval and that approval stands, but they cannot find the appropriate property to move into, so it is a supply challenge in the first instance. We are not getting feedback on the product itself.

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Well we are one of the 400 approved and unable to find the right home. As for feedback on the product that I have provided to BOI the 5 year limit compared to others is a big minus.

Hi Majj

I presume what they mean by feedback, is that the product itself is not the reason people are not drawing it down.

If you could find the right home, the product would not be a problem for you.

By the end of the 5 years, I suspect that the gap between tracker rates and SVRs will be greatly reduced.

Brendan

Hi Brendan,

400 is a tiny figure and likely a very small of people with boi trackers. Clearly not everyone wants to or even can part with the tracker, I wonder how it compares to AIB or EBS which had better terms?

MAJJ

Hi Majj


A good question, they are appearing before the Oireachtas Finance Committee on Thursday and I will ask a TD to ask the question.

Brendan

Thanks, would be interested to see how that goes.