Trackers Good! SVR Bad! Any exceptions to this rule?

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ajapale

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I read Charlie Westons article in the Indo this morning and later heard him on the Pat Kenny show talking about the "lousy" value afforded to SVR mortgage holders.

The industry representative tried to infer that there were circumstances in which an SVR might be more suitable to a consumer. Im wracking my brains and cant come up with any senario in which an SVR might be more suitable than a tracker.

Can any one else think of a case?
 
If the SVR is cheaper presumably? But if this is the case at any point in time there is no guarantee with an SVR that it will remain the case.
 
I think you would be hard pushed to find any financial institution in Ireland where their SVR was lower in APR terms than their worst ECB tracker rate, for Principal Private Residence. Maybe some cases where the Investment Home Loan rate may be lower than an ECB rate.

A lot has been made of the fact that SVR rate rises recently imply that banks have been fleecing customers, what is in fact happening is that bank's are unable to pass on the hugely increased costs of funding mortgages onto ECB tracking mortgages. But then there was always basis risk for banks in ECB Vs Euribor rates, just that the spread was quite low historically. 1mth Euribor vs ECB for most of the last 9 years was around 10bps, but now can be up to 50bps. So, if a bank borrows from another bank at 1m euribor to lend to an ECB tracking mortgage their margin has fallen by 40bps.

Yes - I can hear the boohoohoo's already, but banks are out there to make profits whether you like it or not!

My view is never touch an SVR with a 40ft barge pole.
 
I can't think of any examples either.

If you take out an expensive tracker now, you are not committed to it, but the bank is. So if the margins fall, then you can renegotiate down or switch your mortgage. But if margins rise, they can't increase it.

Brendan
 
Now that we are in Euroland, it is so unlikely as to be hardly worth mentioning, but at the time of the last currency crisis, when interbank interest rates ballooned, you would have got creamed on a tracker. There was a time lag on standard variable mortgages going the same way and in fact the crisis was over before then.
 
The only instance I can think of is where the SVR has a discount rate for the first year. However, some trackers also have this and in any case it is only a short term gain. IMHO, ECB Tracker every time.
 
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