Don't pay lump-sums off your cheap AIB/EBS/PTSB tracker

[Brendan Burgess]

There have been media reports recently that AIB and PTSB is talking to the troika and the government about selling their cheap trackers off to the IBRC or some other vehicle.

The argument is that these cheap trackers are dragging down the profitability of AIB and PTSB which makes it difficult for them to attract investors.

If this goes ahead, it's likely that your cheap tracker mortgage will be transferred at a deep discount.

How much do you think IBRC would pay for the following?

Mortgage|€300k
house value|€200k
Term remaining |20 years
Tracker rate|ecb + 0.5%

I think that the absolute maximum is €200k.

So if the IBRC buys your tracker from AIB for €200k, I would imagine that they will be very keen to do a deal with you to pay it off early.

So if you have a lump-sum wait until the position on this becomes clearer.

There are many other issues to consider and they are dealt with comprehensively in "Should I use a lump sum to reduce my mortgage?"

They key issue is how safe is your deposit? There are two risks

• Your deposit may be devalued if Ireland leaves the euro
• The bank in which you have the deposit may default

If Ireland leaves the euro, your mortgage should also be converted to punt nuas, so the devaluation of your deposit should be balanced out. However, some have suggested that deposits could be devalued to punt nuas while mortgages would be left in euro. I very much doubt that this could happen, but it's a risk.

 

[Brendan Burgess]

You could get the best of both worlds by asking the bank to allow you to reclaim the overpayment if you need it.

I don't think that they are doing this at present, but they may be forced into this if people stop making overpayments.

Brendan

 

[ClubMan]

You mean a de facto offset mortgage?

http://en.wikipedia.org/wiki/Flexible_mortgage#Offset_mortgages

 

[serotoninsid]

There have been media reports recently that AIB and PTSB is talking to the troika and the government about selling their cheap trackers off to the IBRC or some other vehicle. If this goes ahead, it's likely that your cheap tracker mortgage will be transferred at a deep discount......So if the IBRC buys your tracker from AIB for €200k, I would imagine that they will be very keen to do a deal with you to pay it off early.

Just following up on this to see if anyone has heard anything else in this regard??