"Tracker mortgage holders are feeling the pressure most"

[Brendan Burgess]

A spokeswoman from MABS was on Morning Ireland

Ms O'Hara said people with tracker mortgages are feeling the pressure most.

"They were on a particularly low level [of interest] for a considerable amount of time and now that has risen seven times since last July," she said.

"They are the ones seeing the cost increase on a fairly quick basis as well.


I have no doubt that some are.

If they are on ECB +1%, their rate has increased in the last year from 1% to 4.75% - a big increase and a sudden increase.

But the last tracker mortgage was issued in 2008. If the average mortgage taken out was €200k for 30 years, the average balance is probably around €120k today, assuming that they did not use the huge savings generated in the era of really low interest rates to overpay their mortgage.

Their monthly repayment is now about €1,000 at 4.75%, of which half is interest and half is principal.

So the cost of their accommodation, is about €500 per month.

By comparison, a new home buyer taking out a mortgage of €200k today over 30 years at 4% is paying €1,200 a month of which €700 is interest.

If the tracker mortgage holder is a customer of a mainstream bank, they can fix at a lower rate than the tracker rate they are paying. ( It might or might not be advisable to do so.)

And a customer of a vulture fund could be paying an interest rate of 7% and have no options to fix that rate.

So while I have sympathy for anyone whose really cheap mortgage has increase a lot in cost, there are more pressing problems which deserve our attention.

Brendan

 

[Raging Bull]

The rate increases are hitting those who were already in arrears disproportionately. For example if you were in arrears you could not fix rates so were already stuck on high Standard Variable Rate. KBC was before all the rate rises 4.5% now those have been sold to funds so hitting 8.25%. Same for PTSB also high rates and loans sold.

Trackers had it good for a long time. Rates in Ireland were bad for a long time due to lack of competition.

Significantly the Banks have not passed on to Variables Rate holders the full effect yet because they had high margins to start and have also funded it to some extent by paying savers a pittance.

When the full effects of all rate changes feed in then there will be a huge amount of pain.

Rates are still low by historical standards. Everyone including Nation states got hooked on cheap Rates.