Is there a tracker rate at which it could be guesstimated the bank will not - over the lifetime of the loan - turn a profit on? Taking my own as a case in point, I have 27 years to run on a NIB tracker at ECB + 0.59%. Is that likely to be profitable for them in the long run?There is always the assumption here that the bank is losing on trackers, and will do so for the whole life of the deal. that is not always the case, nor does it have to be true for the whole life of the deal
Is there a tracker rate at which it could be guesstimated the bank will not - over the lifetime of the loan - turn a profit on? Taking my own as a case in point, I have 27 years to run on a NIB tracker at ECB + 0.59%. Is that likely to be profitable for them in the long run?
Thanks for your thoughts on this Mark. Does anyone else have any insight into whether its likely that ECB+0.59% is profitable for NIB?depends on what they could potentially securitise it at - as part of Danske, that could well be possible
There is always the assumption here that the bank is losing on trackers, and will do so for the whole life of the deal. that is not always the case, nor does it have to be true for the whole life of the deal.
Yes - that's the approach I have been and I am taking currently. Concerns as regards where to put savings (as discussed ad nausem on AAM) have led me back to this subject - as if NIB could offer a 'deal' - then I could close out 50% of the loan in one hit.At ECB + 0.59% you'd be better off not paying too much off your mortgage (It's the cheapest debt you'll ever have!). Better to pay off any other debt you may have instead - overdraft, credit cards, car/personal loans etc. - and put the rest into savings accounts.
It would sound like there is nowhere to go in this regard. At the end of the day, it's their call. However - as the one upside out of all of this - it's the cheapest financing you or I will probably ever see - so I don't intend to surrender one cent of it ahead of schedule. I can only suggest that you do the same.Spoke to 2 different mortgage advisors in NIB who advised there wont be any incentive on offer for overpaying, anyone have any other ideas on where to go
It would sound like there is nowhere to go in this regard. At the end of the day, it's their call. However - as the one upside out of all of this - it's the cheapest financing you or I will probably ever see - so I don't intend to surrender one cent of it ahead of schedule. I can only suggest that you do the same.
Yes - your quite right it is - and I can see the merit in what your saying (re. overall rate as it exists now and is likely to exist in the future). I suppose everyones circumstances will be different but I think I could sustain a higher interest rate so not overly concerned about that.Your position is focussed on margin rather than the absolute interest rate.
I guess i'm approaching it from the point of view of deposit savings rates being higher than the mortgage rate. I understand that deposit rates are artificially high right now and I guess if they reduce, there may not be so much merit in taking this approach.The other argument about having low margin mortgage financing is that you put surplus cash into a deposit account and use it to pay-off when interest rates start to rise - but what is the optimum time to do that?
Maybe you are looking at this from only one point of view and one point in time. Historically, the maxim used to be to overpay when interest rates are low to maximise the capital paid off, so that when general interest rates rise, there will not be so much exposure to rising interest rates. Your position is focussed on margin rather than the absolute interest rate. Yes 0.51% is fantastic margin over an ECB rate of 1 or 1.5%, but if ECB was up at 4%, then 4.51% is not so pretty, and you may be thinking it would have been better to overpay a bit at low interest rates.
The other argument about having low margin mortgage financing is that you put surplus cash into a deposit account and use it to pay-off when interest rates start to rise - but what is the optimum time to do that?
An acquaintance of mine with a €450,000 tracker mortgage with a foreign-owned bank was offered €100,000 to convert it into a standard variable-rate loan. That's the equivalent of a 22pc writedown. Add that to the mix and the Irish-owned banks are looking at a further €13bn of losses. In other words, between arrears and losses on trackers, it's hard to see how the Irish-owned banks can escape with losses of much less than €40bn on their mortgage books.
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