PTSB Mortgage holders to get 10pc bonus for paying lump sum off trackers

I dont know what branch of "game theory" this comes under but I figure that the banks first offer has to be their best offer.

This is similar to a redundancy situation where if there is an expectation of a better offer some time in the future than there will be little or no takers.

If I were a bank I would pitch it initially slightly higher then when a certain set amount had been achieved then shave off a few points until another threshold figure had been achieved. I would also publicise the fact that it was a limited time offer and that once the quota had been achieved that the next round would be on less favourable grounds.
 
So, does this mean that if you were to pay off your mortgage you'd get a 10% discount?

Noone seems to have mentioned clearing it altogether yet.

We're just about to start the selling process and have a PTSB tracker, hoping to get a new mortgage with them on their 5 yr fixed for <50% LTV (using the fact that we'll be off a tracker as leverage if necessary to convince them to give it to us). If they gave a 10% discount on paying it off we'd be €15k better off - nice!

Also, someone mentioned regular over-payers.

We've a credit of €18k built up, using PTSB's way of allowing it as a separate balance, wonder if we asked them to take that off the capital would this constitute a qualifying payment?
 
The offer is limited to 50% of the outstanding balance.

I don't know what will happen to those who are selling their home.

I don't think you will get any credit for the €18k overpayment built up.

Brendan
 
I heard you on Drivetime Brendan. Tuned in especially :) Good, clear interview. I tend to agree with you that people will mostly hold off on a wait and see policy. Having listened to you, I think I will wait and see what happens with this round.

I have just under €98,000 left and 11 years on my mortgage at ECB +0.80% and my repayments monthly are €801.85.

I have €49,000 savings in a Triple 35 PTSB account at 2.5% which earned about €1200 over one year and was thinking of transferring about €30k off the mortgage but, your calculator in another post helped clarify things for me. After what the banks have done to this country I think the money is safer in my personal name than theirs! So Ive decided to hold onto my savings for a bit longer.

Anyway, thanks for the advice and all the posts on this today.
 
Thanks Ris

With 11 years only to go, 10% seems like very good value for you. The max you can pay off is half you mortgage, which is €50,000 in your case.

I am surprised that the calculator didn't scream - "pay it off."

After what the banks have done to this country I think the money is safer in my personal name than theirs!
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That is one huge advantage of paying off your mortgage - your deposit is always at some risk. I think it's safer if you pay it off.
 
Ris, Have you any financial requirements (such as college fees) on the horizon (years 7,8,9,10 & 11)? Also you should consider not locking away all your savings in paying down the mortgage. I suggest you should keep some of it readily accessible in the event of the unexpected. aj
 
50% would still be great if you can access the cash. In our case both my parents have recently come into a bit of cash (retirement/inheritance) and we already have a good bit that would be a deposit for a house - so may potentially be able to use deposit for the discount and then borrow it from parents when we need it, repaying from the proceeds of our house sale, assuming safe enough sale , but the other houses round here are selling well and we wouldn't need deposit if no sale anyway.
Be interesting to see what the take up is.
 
Is it just me thinking that PTSB must try harder .

Im on a tracker (ECB +.8) but am due to lose this in the short term (12-18months) as we are planning to move house and just waiting for right property to come on the market , so this deal is not really worth anything to me because any disposable income I have will be held for renovations on new home .

But i was expecting something more significant .

M
 
good question, I was also wondering about bank of scotland, also does anyone know if they would do a deal on a lump sum settlement of a mortgage?
 
Mixednuts said:
Is it just me thinking that PTSB must try harder .

Im on a tracker (ECB +.8) but am due to lose this in the short term (12-18months) as we are planning to move house and just waiting for right property to come on the market , so this deal is not really worth anything to me because any disposable income I have will be held for renovations on new home .
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They will lose by offering you this deal. If you have spare cash you should pay it off as quickly as possible in case the deal gets fully subscribed. Your correct strategy is

1) Pay as much as possible to PTSB and get the 10% bonus
2) Sell your house
3) Start looking for another house.

I would go further and say that once you get a contract signed on your house, you should beg or borrow as much as possible to reduce your mortgage as much as possible.

Brendan
 
Mixednuts said:
Is it just me thinking that PTSB must try harder .

Im on a tracker (ECB +.8) but am due to loose this in the short term (12-18months) as we are planning to move house and just waiting for right property to come on the market , so this deal is not really worth anything to me because any disposable income I have will be held for renovations on new home .

But i was expecting something more significant .

M
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Sorry if this sounds harsh, it's more of a general statement, but I don't get this sense of entitlement.

I put some calculations up here about a year ago showing what I thought the bank's should pay to get someone off a tracker. These were based on some actuarial assumptions. I came up with a figure just below this level.

Just to get things straight - the bank doesn't owe you anything. You have an outstanding mortgage which you have to pay off. The average term of a mortgage is only 7 years (it may be more now, this was a throw away stat from a few years ago). The banks know this. You seem to know this - or at least the logic under-pining it in that you recognize that you'll have to give it up in the short term. If you keep waiting for a better deal you could be left waiting.

Ajaple, I think you're spot on. This is a good deal - or at least good enough. The banks may be losing more on some trackers but once they've reduced their loan book by a certain amount they'll just swallow these losses and move on with their business.
 
Hi,

If people avail of this, will they still keep their tracker rate on remaining mortgage balance?

Will the bank contact each customer to offer this or is it up to the customer to contact the bank if they are interested?

Will it apply to Interest Only loans?

Thanks.
 
Hi Howitzer

I agree with your general view that this is a good deal.

However, I don't agree with the basis of your calculation in the other post which I reproduce here

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.
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I can't agree with your assumption that the average tracker mortgage taken out in 05 - 07 has 3.5 years to go.

The average of 7 years was during the peak of the switcher mortgage era - switchers are no longer available.
People who bought during 05-07 are in negative equity, so they will not be able to move, even if they wanted to.
People who are on cheap trackers, who are not in negative equity, will factor this into their decision and will delay their move.

Against that, someone who has cash available to them now who is considering availing of this deal, may well be able to move within the next 10 years.

I based my calculations on an example of 20 years to go on a mortgage. While the average time to go will not be 20 years, it will be closer to 20 than 3.5

But if someone thinks that they will be paying off their mortgage in the next few years, 10% is a great deal.
 
Brendan Burgess said:
Thanks Ris

With 11 years only to go, 10% seems like very good value for you. The max you can pay off is half you mortgage, which is €50,000 in your case.

I am surprised that the calculator didn't scream - "pay it off."



That is one huge advantage of paying off your mortgage - your deposit is always at some risk. I think it's safer if you pay it off.
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Thanks for the reply. I hadnt really thought about the deposit risk - mostly because the money is in the same bank as the mortgage so in the back of my mind I guess I figured one would offset the other if the worst came to pass.

Anyway you have made me think again. I will give PTSB a call today and arrange to see them and take it from there. Cheers
 
Ris said:
Thanks for the reply. I hadnt really thought about the deposit risk - mostly because the money is in the same bank as the mortgage so in the back of my mind I guess I figured one would offset the other if the worst came to pass.
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I wouldn't assume that
 
Just did a few calculations on the value of this deal to someone with an investment mortgage and a tracker of 0.8% above ECB using Brendan's link
http://www.loanclc.com/

€100,000 outstanding with 11.5 years to run.
Total repayments = €110,781

Pay €5,000 off mortgage and get €500 credit from PTSB.
Total Repayments = €104,688

Saving €6093 in total repayments - but this has cost you €5,000 to benefit by €1093 over 11.5 years.

Factor in the reduction in interest & the subsequent rise in tax of €497 over the 11.5 years (assuming no changes in the tax regime for landlords).

Factor in having my €5,000 available to me with a small interest accruing (let's say 2% p.a less DIRT) each year which would give me €866 in interest over 11.5 years from this link
http://www.moneychimp.com/calculator/compound_interest_calculator.htm

€497 + €866 = €1363 v €1093 (saving from PTSB deal)

So in this case a landlord would be worse off by taking this offer.
These calculations assume that interest rates stay at the current rate over the 11.5 years. Of course this won't actually be the case.

With ECB rates at 2.00% the deal would save €1440 but would cost €700 in lost tax relief & €866 in interest = €1566.

With ECB rates at 3.00% the deal would save €1798 but would cost €914 in lost tax relief & €866 in interest = €1780.

So I think the ECB interest rates would have to be over 3.00% for the full 11.5 years before there would begin to be any advantage at all to taking the deal for an investment mortgage holder. At what point it becomes an advantage to tie up €5,000 is debatable. The ECB rate would have to be 6.00% over the full 11.5 years to gain €373 by paying off €5,000 and that's assuming that the saving interest rate stays at 2% less DIRT.

So whatever about this possibly being a good deal for home owners - I just don't see the advantage for an investment mortgage holder (the caveat being the figures that I have used).
 
Do they apply the €500 now or at the end of the mortgage? If you have 20+ yrs to go, then €500 won't be worth much by then.
 
Brendan Burgess said:
Hi Howitzer

I agree with your general view that this is a good deal.

However, I don't agree with the basis of your calculation in the other post which I reproduce here

I can't agree with your assumption that the average tracker mortgage taken out in 05 - 07 has 3.5 years to go.

The average of 7 years was during the peak of the switcher mortgage era - switchers are no longer available.
People who bought during 05-07 are in negative equity, so they will not be able to move, even if they wanted to.
People who are on cheap trackers, who are not in negative equity, will factor this into their decision and will delay their move.

Against that, someone who has cash available to them now who is considering availing of this deal, may well be able to move within the next 10 years.

I based my calculations on an example of 20 years to go on a mortgage. While the average time to go will not be 20 years, it will be closer to 20 than 3.5

But if someone thinks that they will be paying off their mortgage in the next few years, 10% is a great deal.
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My original calculations were based on information available at the time. Since then mortgage terms have, probably, increased. The difference between variable and tracker rates certainly has. So to my eyes 10% looks about right. Today.

My original calculations were based on giving up the tracker all together. This deal allows you to retain it for the outstanding amount. This is a key point.

Michael Dowling of the Independent Mortgage Advisers Federation has re-iterated his 25% assertion. No calculations have been supplied to back that up but I'd assume they'd be similar to yours and others I've seen elsewhere. To be honest I find those figures hard to follow and accept. They're correct but I don't think they're right.

They assume the mortgage is retained for the duration of the term and ignore increasing ECB rates and what this may cost the mortgage holder. They look best case scenarios and I think the true cost is (or, will be) lower.

If this deal was available to me and I had money burning a hole in my pocket I'd be happy to take it. More so if I aspired to move property in the short to medium term.
 
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