AIB Thinking of trading up but in the Prevailing Rate Cohort

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sse123

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Question:
1. If I was to sell my house right now, then in Aug/Sept AIB decide to give us all tracker rates for the remainder of the mortgage, then i presume we have no entitlement to anything further because our mortgage would have been cleared with the sale of the property?
2. Do we have any idea when a decision will be made on whether or not the tracker rate will be applied to those affected?

Hypothetically, if we were to sell right now today and miss the benefit of the tracker rate and subsequent early payoff of our mortgage, then we might be making a huge mistake, in that we could have a property asset with no mortgage a lot sooner than we ever thought.
Any advice appreciated?
 
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It's not clear whether you are trading up or not, but as the answer might be useful to others, then I will assume that you are.

AIB will not decide of their own accord to give people trackers.
They will only do so if someone takes and wins a High Court action on the issue and the Central Bank tells AIB to apply it to everyone else.

So, you should make an assumption that you will not be getting a tracker mortgage and plan your life and house moves accordingly.

But even if you knew that you were going to get a tracker at 1.5% in 12 months , it would still be right to trade up.

If AIB had a change of heart and agreed to give everyone a tracker today it would be at ECB +1.5%.

If you then trade up, they would add 1% to this margin, so the new rate would be ECB +2.5%

If you trade up now, you can get a fixed rate mortgage from Ulster Bank at 2.25% or a variable rate mortgage from AIB at 2.75%.

So really, the difference is too small to make any change to your decision.
 
If the High Court orders AIB to apply a tracker margin of 1.5% to everyone from the date their fixed rate ended, you won't lose out by having switched lender.

If that happens, AIB will recalculate the overcharge and the interest on it and any compensation ordered by the High Court.

They will then deduct whatever you have already been paid - the 12% write down + interest on it.

If you have redeemed your mortgage, it won't make any difference. They will do the calculation up to the date you redeemed your mortgage.

Brendan
 
What happened in other cases where people got trackers back?
If someone had switched lender for a better rate - typically from Ulster Bank to Bank of Ireland- Ulster Bank took them back on a tracker and paid the difference between what they were charged by BoI and what they would have been charged by Ulster Bank

What happened when people traded up?
They would have had to argue that they would not have traded up if they had a tracker.

I doubt that would be plausible on a margin of ECB +1.5% going to ECB +2.5%
 
Summary

Make your plans on the assumption of not getting a tracker.

If it happens, then revisit it.

When trading up, it might be simpler to stay with AIB, as any potential solution or extra compensation would be easier to implement. And AIB's variable rates are competitive.

Brendan
 
Thanks Brendan.
Yes am considering trading up.
I understand what you mean above, in relation to IR being low now anyway.
I was thinking instead of selling the house, we should instead hold on to it now, maybe rent it out, since the mortgage term could reduce by a few years if the lower rate is applied for the remainder of the term. The house could become a wholly owned asset a lot sooner than we thought?
 
Hi sse

So you have enough resources and salary to get a mortgage to buy your new house without selling your current home?

So the question is should you sell your home and keep it as an investment?

How much is your current home worth?
How much is the balance on your mortgage after the 12% write down?
How many years are left on your mortgage?

Brendan
 
Brendan Burgess said:
Hi sse

So you have enough resources and salary to get a mortgage to buy your new house without selling your current home?

So the question is should you sell your home and keep it as an investment?

How much is your current home worth?
How much is the balance on your mortgage after the 12% write down?
How many years are left on your mortgage?

Brendan
Click to expand...
Hi Brendan,
Yes thats what i was contemplating.
Is it possible to send you a private message?
 
Brendan Burgess said:
Hi sse

So you have enough resources and salary to get a mortgage to buy your new house without selling your current home?

So the question is should you sell your home and keep it as an investment?

How much is your current home worth?
How much is the balance on your mortgage after the 12% write down?
How many years are left on your mortgage?

Brendan
Click to expand...

Yes I hope to be able to be approved with our current circumstances, considering we now have LTV < 60%.
Current property value: ~ 165-175k
Balance: ~100k
Remaining term: ~13 yrs
 
OK, so you are paying 2.75% mortgage rate on the €100k
You will be knocking about €7k a year capital off this.

Assuming you don't get a tracker back, this would be very marginal.

You would be better off using the €70k equity to reduce your new loan. You will get a tax-free and risk-free return of 2.75% on this by paying off your mortgage .

If AIB is forced to give you a tracker of 1.5%, it would reduce your interest bill in the first year by €1,250 before tax - 1.25% ( 2.75% - 1.5%) of €100k

So about €600 after tax.
As you pay down your capital, this benefit falls quickly.

So make your decision as to whether to sell or keep your property independent of the tracker issue.

Sarenco has a Key Post on the topic here

Key Post - Keep Apartment as Rental or Sell?

Updated May 2020 The question regularly comes up on AAM whether somebody should keep an apartment that their family has outgrown as a rental or whether they should just sell up. Borrowers often run projections on the anticipated rental income from an apartment with a cheap tracker and conclude...
www.askaboutmoney.com

Brendan
 
Brendan Burgess said:
OK, so you are paying 2.75% mortgage rate on the €100k
You will be knocking about €7k a year capital off this.

Assuming you don't get a tracker back, this would be very marginal.

You would be better off using the €70k equity to reduce your new loan. You will get a tax-free and risk-free return of 2.75% on this by paying off your mortgage .

If AIB is forced to give you a tracker of 1.5%, it would reduce your interest bill in the first year by €1,250 before tax - 1.25% ( 2.75% - 1.5%) of €100k

So about €600 after tax.
As you pay down your capital, this benefit falls quickly.

So make your decision as to whether to sell or keep your property independent of the tracker issue.

Sarenco has a Key Post on the topic here

Key Post - Keep Apartment as Rental or Sell?

Updated May 2020 The question regularly comes up on AAM whether somebody should keep an apartment that their family has outgrown as a rental or whether they should just sell up. Borrowers often run projections on the anticipated rental income from an apartment with a cheap tracker and conclude...
www.askaboutmoney.com

Brendan
Click to expand...

Thanks very much again Brendan.
Thats great advice to take away.
 
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