Will bank "settle" a mortgage for a reduced sum?

I have a colleague in a fortunate position.

He has an outstanding mortage balance of 150k approx, it's a tracker mortgage of 1.5% over the ecb. No negative equity, good credit history and 15 years left on the mortgage.

He has recently come into approx 120k. He has a little more savings on top of this.

His question: What is the liklihood of his bank settling his mortgage now for less than the 150K owed? Would it be in their interest to get in say 130k cash now and end an unprofitable tracker?
Any opinions greatly appreciated!

Jetblue said:

I have a colleague in a fortunate position.

He has an outstanding mortage balance of 150k approx, it's a tracker mortgage of 1.5% over the ecb. No negative equity, good credit history and 15 years left on the mortgage.

He has recently come into approx 120k. He has a little more savings on top of this.

His question: What is the liklihood of his bank settling his mortgage now for less than the 150K owed? Would it be in their interest to get in say 130k cash now and end an unprofitable tracker?
Any opinions greatly appreciated!

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Very unlikely. Some trackers may be unprofitable now but eventually the markets will return to normal. Also 1.5% over ECB is decent margin for the banks. There are trackers out there paying less than 40bps over ECB.

Jetblue,

Given that your friend is paying a rate nearly 1.8% higher than the rate at which the bank is borrowing it is unlikely that they would want to lose a profitable customer. By paying the mortgage on time and paying such a rate, they are helping prop up some of the less profitable areas of the bank.

In addition the bank will lose the potential interest for the remaining 15 years of the loan.

Your friend is the type of client the bank would like to keep and they would not have any reason for wanting to pay to get rid of them.

There may be a savings bond out there that is attracting 3.33% plus that may make it more attractive to deposit the money even with DIRT taken into account.

"Given that your friend is paying a rate nearly 1.8% higher than the rate at which the bank is borrowing"

Thanks for your replies!
But I was under the impression that banks were borrowing at an interbank rate which was higher than the Ecb rate, am I mistaken? is this period over?

Yes, this period is over. 3 month Euribor is back to around 0.7% now.


www.moneybackmortgages.ie

I have approx 60k left on a mortgage which is at 0.5% above the ECB rate(1.8%) and was thinking of making the same approach. It would seem to me they are getting a good deal at 50k considering I have 5.5 yrs left and there will approx 5k of Interest foregone anyway if I pay off now. Is the concensus that I am wasting my time or have they being known to do a deal?? Any input would be appreciated before I make a fool of myself with them

carpin taxt said:

Why not just pay off the 120K+ and have a remaining mortgage of 20/30K? Wouldn't that be good enough of a deal?

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Not if a bank will give him more than 2.5% (ECB + 1.5) for his money on deposit.

Another option is to do the sums on paying off enough of the mortage to reduce his LTV, thus dropping down to a lower mortage interest rate and stick the rest on deposit.

Towger said:

I would give it a go. NIB I assume, the problem is getting to talk to someone who has the authority to do so. If their staff morale is anything like what I encountered during my odyssey through UB's departments last week, they wont give a .. that you are actually trying to help them. They will be more interested in who gave you their name/number/email and how dare you disturb them. Only to give you another name/number/email to contact as the next port of call on your never ending journey from Dubin to Belfast like a pin pong ball.

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For info; I gave it a try and got a mildly interested voice at other end. He said it came up with others and they (PTSB) weren't interested. However, he said that he would send a statement outlining what I would have to pay now if I chose to cash it in. At least I planted the seed but I have a feeling it fell on stony ground. BTW thanks for input.