Tracker for Movers - Advice Appreciated

Hi,

We have a tracker mortgage on ECB+1.25% (originally with KBC as a result of the Tracker Redress Scheme). KBC transferred the mortgage to Bank of Ireland when they left the market. We are looking to sell our current home, valued at approx. 400k and buy another for just over 500k. We have 18 years left on our mortgage and approx. 120k capital remaining to be paid. Bank of Ireland have offered a mortgage to cover the new additional capital for the new house with a mortgage fixed at 4.75% for 5 years, rolling on to a standard variable rate after 5 years.

Part of the process would also mean giving up our Tracker for a product called Tracker for Movers (also with Bank of Ireland) which appears to be the same as the original Tracker apart from a rate increase from ECB+1.25% to ECB+2.25%.

I am hoping for general advice/suggestions on this arrangement and also specifically to address a point in the Memorandum of Understanding in the Trackers for Movers Application form which states:
'I understand the Bank has no obligation to make a Tracker for Movers interest rate available to me and makes no
promise to me to give me a Tracker for Movers interest rate. However if the Bank offers me a Tracker for Movers
interest rate, it will only do so through a Mortgage Loan Offer Letter properly signed by the Bank and sent to me.'
This was surprising as the original KBC Mortgage Agreement states clearly that on buying a new home that the Tracker+1% will be made available and we have confirmation in writing that Bank of Ireland would abide by the original KBC Mortgage Agreement.

Thanks, this is new territory and all advice would be very much appreciated

CoastRunner said:

This was surprising as the original KBC Mortgage Agreement states clearly that on buying a new home that the Tracker+1% will be made available

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Can you upload that section please. I have never seen it and I wonder if you are misreading it.

If you have a tracker at ECB + 1.25%, why would they give you lower rate if you buy a new home? Doesn't make sense to me.

You should switch to Avant.


They will give you a tracker at Euribor + 0.9% on the whole loan.

Hi Brendan,

Apologies, I can see how that is confusing. That should read that on buying a new home, we keep the Tracker but it would be increased to ECB+1.25% plus an additional 1% (ECB+2.25% total). I heard it informally referred to as a Tracker+1 but that actually refers to our original Tracker (ECB+1.25%) plus an additional 1% applied if we purchase a new home.

I hope that makes more sense

Yes, that makes a lot more sense and is consistent with current practice.

So they will give you a new tracker at ECB + 2.25% on the existing balance and charge you market rates on any additional money borrowed.

I don't think ECB +2.25% is particularly valuable - currently that would be 2.4% + 2.25% or 4.65% , roughly the same as the fixed rate of 4.75% they are offering.

Avant is much better value.

If you don't meet their lending criteria, AIB may be a better option.



Especially if you qualify for their Green Mortgage.

Brendan

"Tracker movers" were an option when variable interest rates were hugely out of kilter with ECB rates

Eg ECB 0% and standard variable rate 4%+

That's no longer the case and hasn't been for the past few years.

2.25% above ECB would be considered expensive in today's fairly competitive market.

Ignore that aspect and simply look for the best value for the mortgage you require from all lenders.

@Brendan Burgess @peemac Thank you both, Avant looks very interesting. Can I ask if there is any additional risk associated with moving the existing mortgage to and taking out a new mortgage with Avant as opposed to the traditional banks, in particular in the long term?

No, there is no material risk in moving to Avant.

There is a theoretical risk that they could leave the Irish market and sell their loans to a vulture fund. But if you have a tracker, then this would not impact you as the rate would be determined by euribor. BoI would be riskier in that they have a long history of exploiting existing customers with very high rates.

CoastRunner said:

Can I ask if there is any additional risk associated with moving the existing mortgage to and taking out a new mortgage with Avant as opposed to the traditional banks

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I was told that Avant are likely to be less reluctant than the trad banks to begin the repossession process if you can't repay the loan.

Fortune said:

Avant are likely to be less reluctant than the trad banks to begin the repossession process if you can't repay the loan.

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Yes, they are a more professional outfit than the traditional banks.

They lend more conservatively and consequently charge lower interest rates.

You may well prefer to pay a higher rate and a rate set at the whim and caprice of the lender so that if you fall into arrears it will take Bank of Ireland ten years to repossess your home compared to the 8 years it would take Avant.

That's good info, thanks. If Avant were to leave the market and sell the loan, would the new lender be obliged to adhere to the terms of the original loan as BOI did with KBC?

In the case of switching a mortgage to Avant (or any other lender), does the borrower retain the option of withdrawing any overpayments at a later date or are they merged somehow into the new loan?

CoastRunner said:

If Avant were to leave the market and sell the loan, would the new lender be obliged to adhere to the terms of the original loan as BOI did with KBC?

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If it's a tracker then they can't change that or the margin charged.

CoastRunner said:

does the borrower retain the option of withdrawing any overpayments at a later date or are they merged somehow into the new loan?

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No. The new home loan is usually for the amount of the redemption value of the existing loan and is used to pay it off. With the new loan, there have been no overpayments to withdraw. Also, not all lenders allow the withdrawal of overpayments.

@ClubMan @Fortune Thanks for the info

Fortune said:

not all lenders allow the withdrawal of overpayments.

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Does any lender allow withdrawal of overpayments?

ptsb treats the overpayments as credits, i.e. the opposite of arrears. You can take a payment break and use up these credits. But you can't get them back.

While with KBC, they confirmed that any overpayments could be withdrawn at any time over the lifetime of the mortgage. While the mortgage was being transferred from KBC, the KBC Transfer Team again confirmed this and after the loan was transferred to BOI, they confirmed that withdrawal of overpayments was an option. With the likelihood of our children going on to 3rd level studies, we were keen to have that confirmed in writing.

I'm surprised to see that it is not common practice across lenders

CoastRunner said:

I'm surprised to see that it is not common practice across lenders

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I've only seen it with KBC, but I've only ever had loans with KBC and Avant.

So are these offset mortgages by accident or something?

CoastRunner said:

While with KBC, they confirmed that any overpayments could be withdrawn at any time over the lifetime of the mortgage.

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I had forgotten that KBC used to allow this.

I can't remember if it was contractual or by concession.

If you have written confirmation from KBC that they will allow this, then BoI would have to respect it.

previous threads on Askaboutmoney

Brendan

@Fortune It's possible that BOI only made withdrawal of overpayments an option because they were adhering to the conditions of our original KBC Loan Agreement?

Can I ask if Avant have a clear policy on how the withdrawal of overpayments are handled?