Ombudsman: No reason to expect that "variable rate" related to a tracker rate

Stitcher

Frequent Poster
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149
I wouldn't doubt that the tracker emerged as a result of the media attention and some bank deciding that tracking was a good commercial advantage. Who introduced the first 'contractual' tracker? I wonder? And when ?
 

Brendan Burgess

Founder
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Hi Stitcher

Trackers were commonplace in the UK before Ireland.

When Bank of Scotland entered the Irish mortgage market, they introduced trackers.

I am guessing 2001?

Brendan
 

Megafan

Registered User
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70
I imagine trackers were probably the most transparent type of mortgage originally. The banks margin was the banks margin over the ECB and that was that.
 

Megafan

Registered User
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70
The ECB rate was not the banks' cost of funding. So that was not that.

Brendan
Ah ok. So they could have used cash from other sources (deposits maybe) or other funding at a lower rate so there would be a further margin to the bank within the overall rate charged to the customer?

So they wouldn't be transparent at all then!
 

peemac

Frequent Poster
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727
So a good way for a bank to manage market challenges such as competition & media pressure around rates was to somehow conflate an SVR & tracker product.
If you have access to Irish Times archives, then in the property supplement every Friday they published "best buys" and this listed all the available rates from all the lenders that week.
Trackers and Standard variable rates were shown as two different products and the difference between them was usually quite small. Sometimes as little as 0.05% and sometimes they were identical.

Back then, the real advantage of a tracker was that you didn't have to wait a month or two for the banks to pass on rate cuts. As banks tended to act quicker on rising rates, the fact that the rate would rise as soon as the ecb rate changed was not much of a negative.
That was the primary selling point of trackers as the rate difference was negligible.

If you had a time machine and put yourself back in 2004/5/6/7 and without the current knowledge of how valuable a tracker was, no one rate option would jump out at you as THE RATE to go for. - Doesn't matter if you were a first time buyer, a broker or a bank manager as the different rates suited different people at the time
 

Brendan Burgess

Founder
Messages
40,638
without the current knowledge of how valuable a tracker was, no one rate option would jump out at you as THE RATE to go for. -
the real advantage of a tracker was that you didn't have to wait a month or two for the banks to pass on rate cuts.
Hi peemac

I never saw this mentioned anywhere as an advantage of a tracker mortgage.

There was no need for the "current knowledge".

It was frequently pointed out on Askaboutmoney since BoSI introdcued them, that tracker mortgages were valuable because the banks could not arbitrarily increase rates. That was the main advantage.

Brendan
 

Brendan Burgess

Founder
Messages
40,638
Hi peemac

You inspired me to start this thread to clarify why people were actually recommending tracker mortgages.


Brendan
 
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