variable ECB vs variable

[MargeSimpson]

We are coming up to the end of our first year paying a mortgage. Yeah! just a few years to go!!!

Our bank has given us several options to change to, as our first year introductory rate is over. We are probably going to go variable.

But there are two options. Variable + ECB and regular variable.

I think I understand how both work, but which one is the better option.

s

 

[Unregistered]

The first...which is a tracker. Irish Banks have been notoriously slow to pass on the benefits of an ECB rate fall...the opposite for a rise. However, with a tracker you are linked to the ECB rate.

 

[ajapale]

Tracker=Good SVR=Bad

Hi Marge,

Tracker (ECB +) good,
Standard Variable Rate (SVR) bad.

there are loads of old post on this issue. When I get used to the new site ill point you to them.

ajapale

 

[MargeSimpson]

I know, I have seen posts on this before but the search is not showing up any.
I'll try again. Thanks for your response!!

 

[GeneralZod]

Tracker (ECB +) good,
Standard Variable Rate (SVR) bad.


Is it that clear cut? Are standard variable people complete mugs now.

When the ECB rate was going down they didn't pass on all the drops (bad).

But on the way back up they might not pass on the full increase on the standard variable (good, if they do it).

Only a few years ago people were saying the standard variable was the best option.
Admitedly this was before tracker rates were as prevalent as they seem to be now.

 

[ClubMan]

Tracker (ECB +) good,
Standard Variable Rate (SVR) bad.

Is it that clear cut? Are standard variable people complete mugs now.

When the ECB rate was going down they didn't pass on all the drops (bad).

But on the way back up they might not pass on the full increase on the standard variable (good, if they do it).

Unfortuantely with many standard variable rates the lenders passed on ECB increases in full and immediately but only passed on decreases in part and after delays. This is how they managed to increase their margins on standard variable rates by stealth over the years. It's not so much a case of SVR bad, tracker good but more a case of a good value (i.e. low margin) tracker being the bet bet for minimising overall interest charges over the lifetime of the loan for those who can put up mortgage repayments that fluctuate in line with the underlying ECB rate.

 

[AKA]

Unfortuantely with many standard variable rates the lenders passed on ECB increases in full and immediately but only passed on decreases in part and after delays. This is how they managed to increase their margins on standard variable rates by stealth over the years. It's not so much a case of SVR bad, tracker good but more a case of a good value (i.e. low margin) tracker being the bet bet for minimising overall interest charges over the lifetime of the loan for those who can put up mortgage repayments that fluctuate in line with the underlying ECB rate.

But even if you go with the SVR won't you have to put up with repayments that fluctuate at the discretion of your lender?
How are SVRs regulated?

When you take the discounted rate for a year what type of rate are you offered afterwards? I've read in other posts of borrowers not being offered a tracker mortgage after the initial discounted period.

Also if you go to a broker, can you specify that you want a tracker mortgage?

Any info appreciated.

Thanks.

 

[ClubMan]

But even if you go with the SVR won't you have to put up with repayments that fluctuate at the discretion of your lender?

Yes - both SVR and tracker repayments will vary in line with the ECB rate. My point was that anybody who can put up with variable repayments should go with the lowest margin tracker available to them rather than a standard variable rate mortgage because of the predictability in terms of margin charged that the former provides.

How are SVRs regulated?

Not sure what you mean by regulated? In practice a lender can charge whatever margin they want (within certain high limits and within the limits of what the market will put up with) but unlike tracker rates there are no guarantees in terms of margin above ECB built into an SVR contract.

When you take the discounted rate for a year what type of rate are you offered afterwards? I've read in other posts of borrowers not being offered a tracker mortgage after the initial discounted period.

It depends on the lender but if you plan to go variable then it might be a good idea to get it clear (and in writing if possible) up front that you can switch to the best tracker on offer. Also don't be mislead by one year discounted rates into going with a lender who offers a good deal in year one but is not competitive thereafter.

 

[AKA]

Thanks for that info. That's what I was thought but just wanted to be sure.