New Tracker mortgages Proposal

RichInSpirit

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Is there a gap in the mortgage market for a new type tracker product?
With much the same type conditions as before but with a larger gap between the ECB rate and the charged rate. For example ECB plus 2% or 2.5%. Giving the banks a bigger margin but still offering the customer more rate security than standard variable rate mortgages.

Maybe even a negotiated rate between lender and borrower ?
 
SVR is much better from a bank perspective as rates are not linked to ECB rate. Allows more flexibility to amend rates. Commercial loans are still mainly tracker as there is more competition in this market. However margins are generally much higher than applied in the boom period.
 
Hi Rich

I agree with you. I suspect that competition will bring them back in time, but probably at ECB + 4%.

Brendan
 
That's interesting that commercial loans are tracker type.
My contention would be that SVR loans offer the bank more flexibility but the customer less protection from rate increases.
Say for someone currently on a tracker of ECB plus 1% wanting to trade up, and SVR being the only alternative, the customer might decide to stay put. If there was an alternative tracker that offered a bit more profit for the bank while still offering the protection of a tracker to the customer, then the customer might be more encouraged to go for the deal.
 
I could easily see a tracker type mortgage but linked to something other than ECB rate possibly
 
I haven't seen (m)any ECB rate trackers on the continent.
Usually mortgages are tracking the 6-mth EURIBOR, rates are currently around 1.75%-2.25% ( would be a EURIBOR + 1.5% to +2%)
However it is very difficult to get a mortgage for more than 25 years, or more than 80% of the house price.

It is unfortunate that it was ever allowed to have mortgages for longer than 25 years, never mind 100%. Probably would have but a lid on the boom back then as well as the craziness we are going through again.

I think the EURIBOR is better for the banks as rates for "real" lending in the market unlike the ECB rate.
 
I haven't seen (m)any ECB rate trackers on the continent.

And with very good reason, they are a dumb idea from a banking point of view because there is no link between the actual cost of financing and the rate charged on the loan! I would love to know what genius came up with the idea of pegging the rate to that of a lender of last resource! It ranks right up there with the EDSEL.

As you say the EURIBOR or something like that would make sense because it at least provides a reasonable link between the interest rate charged and the cost of financing.
 
After all the rigging of all commodity prices, of which money is just one, how can you genuflect to any *IBOR !
At least with the ECB you know who is ........ you
 
I would love to know what genius came up with the idea of pegging the rate to that of a lender of last resource! It ranks right up there with the EDSEL.

.

That's a good question, who introduced the trackers first?

What's EDSEL?
 
I can't see a return to tracker mortgages any time soon. They have shown themselves to be a prime example of reckless lending from the Celtic Tiger. The banks are losing heavily on these tracker mortgages.
The only people that currently see tracker mortgages as a good thing are those of us that hold them. Those that have non-tracker mortgages are subsidising us in an attempt to offset these losses. The banks are, in the main, owned by the taxpayer and he/she doesn't want to lose, or risk losing, more money on loss making products.
The IMF made numerous recommendations to the government as to what to do to sort out the atrocious state of our economy and finances. Most of these we complied with. However, the IMF did state they were disappointed that nothing had been done to tackle the negative effects of tracker mortgages.
A few hundred thousand of us hold tracker mortgages. I assume many are like me:
relived to be be paying 40% less this month than I did in October 2008.
delighted that the Euro cannot get out of its mire.
However, the majority see tracker mortgages as a bad thing. I don't see a return to such products.
 
Peraps if the banks had built in an interest rate floor in the trackers so the contracts were never "out of the money" like they are now then the trackers would not be such a problem for banks. Yes mortgage holders lose out on lower payments but its a fairer deal for the variable rate holders who are left to cover the interest revenue shortfall now anyway.
 
A standard variable rate mortgage loan, is a mortgage where the interest rates vary depending on market conditions. Changes in base rates with the European Central Bank (ECB) will usually lead to changes in the standard variable rate, but the lenders can also increase or decrease the rate at their discretion.
In effect agreement to a SVR mortgage is entering into a contract where the bank can change the interest rate charged at any time at its own discretion. Recent reductions in ECB rates have generally not been passed on to mortgage holders. The only incentive to banks to return to tracker type mortgages is "competition". While I do see reduced SVR's over a limited period being used to attract new borrowers, I really do not see any incentive to banks to return to tracker type mortgage rates in the forseeable future.
Why would they??
 
Why would they??

They wouldn't - at least not voluntarily. But they should be made do so. On what planet is such as one sided contract such as SVR mortgage deemed fair? Essentially the borrower has to sign up to pay whatever rate the bank deems appropriate with no certainty on what that might be. A bank would never agree a loan where there was a rate agreed at the outset, but the borrower was free to decide the interest rate thereafter. ECB rate changes are expected to impact the depositor/borrowers and not banks bottom line. SVR should be banned and either fixed or tracker options being the choice.
 
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