Moving from variable to tracker

kmce

Frequent Poster
Messages
37
hi all

I currently have a 30 yr mortgage with EBS at 5.53 variable.
LTV is 70%.
Is it a no brainer to move this to their tracker rate of 5.2?
What are the disadvantages of Tracker over Variable rate mortgages if any?

I am not to keen to move lenders and incur extra costs but that may be short sighted of me.

I also have an interest only mortgage on an investment property, again LTV is 70% and variable rate on this is 5.93 with EBS.
could I be doing better her
any advice is appreciated
k
 

j26

Frequent Poster
Messages
1,113
I was checking out National Irish recently and the rates I'd get there were 4.6 for the house and 5.19 for the investment property (both trackers).

Depending on the amounts involved you could be able to change provider and the monthly savings would cover the cost of changing provider within a year, or you could take several years off your mortgage by keeping repayments at the same levels as before.
 

ClubMan

Frequent Poster
Messages
43,915
Is it a no brainer to move this to their tracker rate of 5.2?
ECB + 1.2% doesn't sound that competitive unless I'm mistaken? Maybe you should shop around for another lender?
What are the disadvantages of Tracker over Variable rate mortgages if any?
A tracker is a variable - just with a fixed margin over the ECB for the lifetime of the mortgage. Unlike a standard variable where the margin may vary.
I am not to keen to move lenders and incur extra costs but that may be short sighted of me.
It's short sighted to not at least look.
I also have an interest only mortgage on an investment property, again LTV is 70% and variable rate on this is 5.93 with EBS.
could I be doing better
Shop around.
 

jomag45

Registered User
Messages
13
Absolute no brainer to move from SVR to Tracker with the same lender. For the price of a phone call, do it now and start saving straight away, before they jack up the tracker margin again. Also try to negotiate on the margin - threaten to move if they can't do better. It might be harder to get a better rate than the one on offer in the current environment though.

Advantages of tracker over SVR? Well, with shrinking margins, the lender can easily decline not to pass on rate decreases (when that eventually happens). In a rising rate environment, the rates on both products will rise, but SVR product could rise by more than the EBC increase. At least with a tracker, you pay a fixed margin about ECB base rate.

Note though there are better value products out there than those offered by EBS. Customer inertia is one of the factors in the uncompetitive rates at EBS.
 

kmce

Frequent Poster
Messages
37
thanks guys
I rang them this afternoon and they offered me the tracker at ECB plus 1.3% ( 5.3%) and very quickly offered to reduce it to tracker plus 1.25% so there does seem to be some lee way there.
I am going to do bit more research and go back and try and push them for a better margin.
What is the best I could hope for do you think?
EBS do not offer trackers on investment propertys ( so they told me)

I know over the long term we should switch lenders but guys i do not have 1000euro plus spare at the moment to cover the costs.
I am hoping to get some good quotes so I can push EBS for a better deal.

again thanks for taking the time to reply
k
 
C

Camry

Guest
No, it isn't a "no brainer" to chose betweeen a variable and an ECB +120bps tracker (beyond the fact that a 120 bps tracker spread does seem high compared to what many lenders will offer).

Currently the spread between LIBOR and the ECB Refi rate is something above 90bps (it was when I last looked, it fluctuates). That 90bps is what is driving the 5.5% variable rate you currently pay.

Should money markets settle as some point in the next 30 years (a pretty good bet), that margin ECB-LIBOR spread will disappear again to next to nothing and the variable rate could fall below the tracker rate. ALthough it doesn't look very likely at the moment, that could (a big could) happen over the next 12 months.

But, if you have completely flexible contracts (no exit penalties), I find the best bet is just to hop from one product to the next, deciding at any particular time whether the transaction costs (solicitors fees etc.) and hassle make it worth while. Generally this might require some view on the potential period of amortisation of any transaction costs - e.g. At the interest saving you are considering (0.3% pa of capital outstanding in this case), how long would it take to recoup the transaction costs; is it likely the savings will persist that long?)
 

Happy_Harry

Frequent Poster
Messages
277
Why not get a quote from another institution (NIB eg) and use that to get a lower rate from your bank ? Worked well for me, although it was 7 months ago and things have changed since then. But it could save you thousands on the long run, well worth trying.
 
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