BANK OF IRELAND & AIB
ULSTER BANK & KBC
NEW TRACKER MORTGAGE PLANS
Permanent TSB has joined Bank of Ireland and Ulster Bank in offering a tracker mortgage transfer product, permitting their existing customers to sell their homes and take out new mortgages while retaining a significant portion of their tracker loans.
PTSB's plan differs in the fact that the Bank of Ireland plan
increases the mortgage being transferred by 1.3
percentage points and usually forces those people that
transfer to surrender their tracker after five
years, whereas it seems that Permanent TSB tracker
mortgages may continue for the full term still to run on the
Permanent TSB are likely to charge a slightly higher margin
than currently applies (possibly 1% higher) when
issuing the new trackers.
The new rate will apply to the existing mortgage which is
transferred to a new home. Anything above that will attract
the current standard variable rate (SVR).
So although these plans will force existing homeowners that trade homes to pay more interest on their new mortgages, home owners will still save considerably on both Standard Variable Rate mortgages and fixed rates mortgages. A PTSB customer with a current tracker rate of 1.25 per cent may pay a rate of 2.25 per cent on the portion of their mortgage which they transfer to the new property. This is significantly less than the SVR rates currently offered by PTSB.
Any excess above the current mortgage will be charged at the higher SVR rates. It will only apply to residential mortgages, but those in negative equity will be able to apply for it. Ulster Bank no longer offers the option for people in negative equity to keep their tracker mortgage for the full term when they move to a new property.
Typical tracker rates are set at between 0.5 and 1.25 percentage points above the European Central Bank rate which is currently at an historic low of 0.25 per cent. Standard variable rates are typically higher than 4 per cent.
Adding one percentage point to a tracker mortgage would see the monthly cost of servicing a € 100,000 loan increase by about € 60 compared to a monthly increase of more than € 400 if a customer to switches to a regular SVR.
It is the much higher cost of switching to SVR or fixed rate mortgages which may be preventing many of the 375,000 tracker mortgage-holders from trading houses and losing their current cheap mortgages. These new plans by Bank or Ireland and Permanent TSB may increase the supply of houses for sale, especially in Dublin.
The move is likely to force the hands of other banks, such as EBS and AIB, which have been reluctant to develop products to allow homeowners move on.
On the 8th March 2014, it was announced that a new tracker-transfer product will be offered by AIB and its subsidiaries EBS and Haven, and will be available from the summer. KBC Bank will allow homeowners on a tracker mortgage to move the loan to a new property and pay a slightly higher premium on the tracker rate. KBC will match Permanent TSB by allowing its customers to keep the tracker rate for the full term outstanding on their current tracker.
Bank Tracker Available Term Margin on Tracker Max. Loan To Value BOI Yes 5 Years 1.00% 175 PTSB Yes Time left on orginal mortgage 1.00% 175 AIB Launch in Summer 2014 Time left on orginal mortgage 1.00% 175 ULSTER Yes 5 Years 1% to 2.5% 200 KBC Launch in April 2014 Time left on orginal mortgage 1.25% 125 EBS Launch in Summer 2014 Time left on orginal mortgage 1.00% 175
LUMP SUM DEPOSITS COMPARED AIB, EBS, PERMANENT TSB INSTANT ACCESS ACCOUNTS
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