Lack of Zero Floor on Tracker Mortgages About to be Tested

Brendan Burgess

Founder
Messages
38,156
I'm trying to calculate how much BOI are losing on my tracker mortgage (ECB + 1.1%).
If you pay off your mortgage, BoI will then put the proceeds on deposit with the ECB at ECB rate. So they will not be encouraging you to do this.

ptsb gave a 10% bonus to people who paid down their mortgages at a time when they were reliant on ECB funding to keep going. It is the very opposite now.

If you repay a tracker at ECB + 1.1% and your bank can lend it on at 4.5%, they would be delighted to see you repaying your tracker. But that is not the position they are in.

Brendan
 

peemac

Frequent Poster
Messages
648
I'm trying to calculate how much BOI are losing on my tracker mortgage (ECB + 1.1%). Received the 35 year loan in March 2008. Euro 271k loan. Euro 200k outstanding. Current house value approx Euro 225k. I've leased it for 10 years.

If I was able to calculate that the bank stands to lose ~$40k (example) over the next 10 years assuming ECB rates stay below 1%, I'd propose for a ~$25k discount if I repay in a lump sum.

Thoughts on how to model this calculation.
For about 8-12 months at the height of the banking crisis around 2010/2011 banks here were considered risky and they had to pay a premium to borrow from the market.

The media gloated about this in hysterical headlines for several months.

Ecb then threw billions at the financial markets and banks including Irish banks lapped it up and borrowing rates tumbled.

As news that banks were no longer losing money on trackers does not make a hysterical headline, it was left with people thinking that banks continued to lose on trackers.

It's estimated that servicing a good mortgage costs a bank less than 0.5%, so with the exception of about 12 months they have and will continue to make a small profit on your mortgage.
 

Baby boomer

Registered User
Messages
40
ptsb gave a 10% bonus to people who paid down their mortgages at a time when they were reliant on ECB funding to keep going. It is the very opposite now.

Brendan
Ah, so there's pretty much zero chance they'll better (or repeat) that offer. Pity! I'd quite enjoy extracting a bonus from them now.
 
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