Tracker Good! SVR Bad! Banks should be compelled to offer Trackers.

Towger said:
[FONT=&quot]The way I look at it is that Joe Public had almost 10 years to change their existing mortgage’s into trackers. There were even banks paying towards the legal costs. It is their own bad judgement that they did not, just as it is the Irish Banks for using the ECB rate for their trackers while I believe most/all European banks who offered similar products based them on the Euribor rate.[/FONT]
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Not really. Lots of Joes took out fixed rate mortgages assuming that they could shop around when the fixed rate period ended. They had not anticipated this particular problem that the market would have gone from feast to famine.
 
Hi pjnm,

And thanks for the interesting observation. do you know on what basis trackers are offered in other jurisdictions notably in the UK (but also Australia and NZ)? Does this cause commercial difficulties for lending institutions in those places?

aj
 
AJ

Usually, the market is competitive and people can switch to another lender if their existing lender puts up the rate beyond the market level.

We are in an artificial market situation at the moment. If I don't like the rate being charged by permanent tsb, I probably can't do anything about it, if I fall into any of the following categories:

  • Negative Equity or high loan to value
  • high loan to salary (or no salary)
  • Arrears
  • Bad credit record
Even if I don't fall into the above categories, I might not be able to change as the other banks are not too active either.

One of my main issues with the Irish Nationwide was that they did not pass on interest rate cuts to their customers. Those who noticed this asked for a reduction and got one as they could have moved.

Those in arrears, got no reduction as the IN knew that they could do nothing about it.

It might be worth considering making sure that the other banks don't do this. But you could argue that someone in arrears was a higher risk and should pay more.

Brendan
 
Question is tracker on what - ECB rate? Doesn't make sense.
Most foreigns banks I know do their mortgages on EURIBOR trackers, which reflects actually better their costs.
 
ajapale said:
do you know on what basis trackers are offered in other jurisdictions notably in the UK (but also Australia and NZ)?
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I can tell you there are no tracker mortgages in Australia, and there never has been one offered in the last 10 years. It's either SVR or fixed. The big four all increased their margin over the RBA base rate during the gfc to compensate for higher funding costs. The RBA rate is currently 3.75% and vast majority of residential mortgages on SVR are currently between 6.0 and 6.75%, so mortgages are 2.25% - 3.00% over base.

There is one product offered by bankwest called a tracker but it bears no relation whatsoever to the tracker mortgages sold in Ireland because
- its reference rate is the average SVR of the big four banks
- it's only a 2 year intro gimmick
http://www.bankwest.com.au/Personal/Home_Loans/Home_Loan_Products/Bankwest_Rate_Tracker/index.aspx

I can also tell you that the Australian banking system is extremely healthy, well capitalised and highly profitable, unlike the Irish. The stock market and the property market are both doing quite well too.

Far from being a good thing, I think the trackers offered by Irish banks during the property bubble were a symptom of the total madness which prevailed at the time.
 
I was one of those people who " didnt know what a tracker meant" and had a broker not explaining so missed out on that, but if they seem too good to be true, you can be sure we wont get it again!
 
deeheg said:
I was one of those people who " didnt know what a tracker meant" and had a broker not explaining so missed out on that, but if they seem too good to be true, you can be sure we wont get it again!
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Some of the brokers have a lot to answer for. One of them also convinced my sister to go with a variable rate instead of a tracker. No doubt they got higher commission for variable rate customers they bring in.
 
Surely the problem with the Irish/British mortgage market is the crazy situation where banks are allowed to lend long-term but fund that lending by borrowing very short-term. We should aim to introduce mortgage products like those available on the Continent and in the US such as 15-25 year fixed mortgages. The banks should then be forced to match their funding durations to the durations of those loans.
 
Joe Nonety said:
Some of the brokers have a lot to answer for. One of them also convinced my sister to go with a variable rate instead of a tracker. No doubt they got higher commission for variable rate customers they bring in.
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That may have been poor advice depending on the circumstances but the broker would not have gotten higher commission because your sister chose a variable rate. If he put her with a bank that was offering him higher commission than he would have earned elsewhere then there may be a problem.

Your sister would have/should have received a reasons why/letter of suitability outlining why the broker advised the variable rate over the tracker rate. If he/she did not give her best advice then her first port of call is a complaint to the broker and then the Financial Services Ombudsman if she is not satisfied with the response.

[broken link removed]
 
Sherman said:
Surely the problem with the Irish/British mortgage market is the crazy situation where banks are allowed to lend long-term but fund that lending by borrowing very short-term. We should aim to introduce mortgage products like those available on the Continent and in the US such as 15-25 year fixed mortgages. The banks should then be forced to match their funding durations to the durations of those loans.
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This could happen soon but the problem is that the longest term government bond that the lender has to benchmark it's mortgage rates against has been 10 years hence a maximum of 10 year fixed rates. A 15 year bond was issued last year and a 30 year government bond is being talked about.

There is a 30 year treasury bill in the US so they can offer the longer dated fixed rates.

[broken link removed]
 
Terrible idea, I want the banks to make as much profit as possible now I'm a shareholder!
 
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