The mortgage divide, is it right?

The mortgage divide, is it right?

Depending on what type of mortgage you have, you could be paying the banks a lot more than your neighbour

Yesterday’s ECB rate cut of 0.25% will be welcome news to many mortgage holders but for a large proportion, they will never benefit from it.

Tracker mortgage holders will automatically benefit from the new 0.75% rate but the cut is unlikely to be passed on to the vast majority of variable mortgage rate customers.

The rate cut equates to an average saving of €15 a month per €100,000 borrowed.

However, as of right now Ulster Bank are the only lender who have said they will be passing on the cut to customers and you could be forgiven for thinking that that decision was made largely to gain some positive publicity given their recent difficulties.

AIB and EBS have already said they will not be passing it on while Permanent TSB, KBC Bank and Bank of Ireland’s silence on the matter means that it is unlikely they will follow Ulster Bank’s lead. (EDIT: On Friday afternoon Permanent TSB announced plans to cut their variable rate by 0.35%)

The unrest at the various banks’ decision not to pass on the cut to mortgage holders is likely to grow in the coming months with another cut of 0.25% expected soon.

The gap between what tracker and variable mortgage holders are paying is growing steadily and the big question is, is it fair?

According to today’s Irish Independent, the difference between what a tracker mortgage holder and a variable mortgage holder is currently paying is now more than €320 a month.

There are an estimated 400,000 tracker mortgage holders in Ireland, with 250,000 on variable rates.

There have been calls from opposition TDs for the government to intervene in the matter and perhaps now is time they did. We all know that banks are losing large amounts on trackers but is it right that variable rate mortgage holders should have to foot the bill for that?

After all, they are effectively paying for the same thing and not passing on the various cuts only defeats the purpose of what the European Central Bank is trying to do – stimulate the Eurozone economy. It is also not helping those who are struggling with arrears and for whom every cent counts.

Yesterday’s rate cut means tracker mortgage holders are now paying a rate of 1.75% but the average variable rate now stands at over double that amount at 4.2%.

That equates to variable mortgage rate customers repaying €3,840 more on a €250,000 mortgage than their neighbour who is on a tracker.

We’d love to know your opinion on the matter. Let us know your view by voting in our poll and having your say in our comments section.

[poll id=”67″] [poll id=”68″] [poll id=”69″]

There are 25 comments for this article
  1. BD at 11:56 am

    Banks are thieving cowboys and should be treated as such. First time buyers being at the mercy of banks is just a lazy argument. I was offered a discount tracker (ecb + .6) for 1 year and normal tracker for remainder (ecb + 1.1) in 2007. I harrassed the bank into giving the discounted tracker for lifetime of mortgage due to favourable LTV. Didn’t seem a big deal at the time but I am now very grateful for it. I know that its much harder to get funds now but people need to stand up for themselves, get their own figures in order and shouldn’t bend the knee to these corrupt bankers when looking for finance or re-negotiating current arrangements.

  2. sue kelly at 2:19 pm

    It’s all well and good people saying why didn’t you take out a tracker mortgage but many where first time borrowers and at the mercy of the banks. With interest rates soaring people took what they could get and really where at the mercy of the lenders. The Government should now get involved and demand that ALL ECB rate cuts be passed to variable mortgage holders, and same should be backdated.

  3. TGM at 9:47 pm

    I’m coming into good money soon. Clearing my debt with PTSB and then shifting my money to Euro banks. More secure and treated fairer.
    How’s that Fine Gael for not doing what you said you would to get into government. Make the working people pay even more, don’t curb the social welfare bleed and let the reckless bankers and developers walk free in luxury. Driving our cash out of the country.
    What would you expect from a leader who’d afraid of a talk show host………….

  4. YG at 9:26 am

    Some of us lost our trackers. If you purchased around 2009 and were previously on a tracker, the banks wouldn’t lend for a new property unless you signed up to a fixed term or variable. A rock and a hard place. In fact, my house was a new build and I had a tracker agreement but because the build was delayed by a couple of months, my loan offer expired and I was forced to take a fixed term or variable by the time the house was ready.

  5. padraig at 12:43 am

    I have a variable rate mortgage with EBS nd they are now the most expensive in the market,i really feel they are abusing there customers at present and considering they are owned by our goverment and we are bailing them out i am been screwed on the double.
    Fine gael came into power on a lot of promises and are not delivering for the people ,the more people who default on EBS the better they deserve no pity.
    Were quick to give the morgags in the boom time and screw there customers in the bad times.
    Do not expect my vote again Terrence Flannagan.

  6. owen at 12:02 am

    Your statement that it will not be passed on is only partly true. Some borrowers are entitled to it under their loan sanction.

  7. owen at 11:59 pm

    As the bankers will tell you “thats what you signed up to” in the context of banks borrowing the money. So let the banks suffer now. Dont forget many variable rates are calculated as a % over dibor. which is tied into EU rates. In fact there is a case for some borrowers to sue for it on that basis. Read your approval letter, especially for older mortgages. Further those mortgagors may have a legal case against Barclays conduct in respect of their recent disclosures… and the fine imposed would mean that you could rely on the conviction to pursue a “follow on” action. I have done it in a similar type case but different industry.

  8. Stevo at 10:27 pm

    The fact that so many people got tracker mortgages form the banks and now nobody can get them – so you have to pay way more for a mortgage than so many others, just makes it even less likely that I’ll buy a house.

  9. michael at 9:54 pm

    they should be made pass on the rate cut if the rate was to rise of course they would pass it on i am not interested in how it effects there banking i am the customer and they will make allot of money out of the interest they will charge me over the lenght it takes me to pay it back and even more so now after all the tax payers money they have recieved because they did run there buisness properly it is a disgrace they say they will not pass it on

  10. Lizzy at 7:35 pm

    I tried to get a tracker mortgage when I took out my mortgage but missed by a couple of weeks, no choice but to go variable as fixed rates were so expensive at the time. Feel v ripped off paying 4.75 percent, can’t move loan or house as over e120 in negative equity. Any suggestions??

  11. mosey at 6:04 pm

    I was never given the option of a tracker mortgage-only option I was given was either fixed or variable.

  12. Joe at 3:58 pm

    Why did variable rate mortgage holders take out variable rate? Why didnt they take out a tracker in the first place?

  13. Sam at 1:14 pm

    When I got my mortgage 5 years ago I was only given an option of 5 years fixed at 5% and then moving to tracker for 40 years. I was so annoyed at the 5% for 5 years but I was screwed because I was purchasing by myself. My tracker now kicks in to place the end of August and I am so happy about this.

  14. Tony M. at 1:12 pm

    Trackers’ are a drag on from a system that didn’t work – cheap money to buy overpriced property! Forget they exist! Let the banks suffer on!

    Dump the idea of comparisons. The lending rate for variables is moving in the correct direction (Up). This is necessary to stem the over inflated prices of properties and over-indebtedness .

    The only intervention the State should make in the housing sector is to provide for adequate social housing (which it has consistently failed to do), take tax, withdraw incentives, and ensure those involved in real estate trade fairly i.e., that consumer legislation is being properly upheld by those in the ‘game’. Check regularly for issues such as price fixing etc… and move swiftly to punish those that don’t comply with the laws.
    It is my prediction that variable interest rates will increase sharply in the coming years when the Troika is not in town and the banks are again independent and borrowing from the markets and each other.

    That’s the way it should be. It keeps things sane on the ground and discourages ‘bubbles’.

    Comments, Corrections and criticisms welcome

  15. Kiernan Dennehy at 12:57 pm

    At the end of the day, we all signed up to the mortgages that we signed up to at the rates that we chose (and I’d like to be out of mine as much as the next man). If you gambled and chose fixed at a time when rates went down then you lost; if you gambled and chose fixed at a time when rates went up then you gained. The same applies to variables & trackers and we shouldn’t forget that, when (not if) the central EU does take off economically, the tracker percentages will rise to counteract inflation no matter what else is going on. One must take the rough with the smooth! Banks are businesses too and need to balance their books by charging more to those whose agreements allow it (i.e. variable rate customers). Any losses will be borne by the owner but, as this is the government, it means we’ll all end up paying for it anyway. We just need to man up and face the responsibilities that we signed up for and get on with it!

  16. Gareth at 12:49 pm

    They should most definitely pass it on being on a variable rate myself I feel like I’m being screwed over by the banks. This money would be pumped back into the economy.

  17. David Ward at 12:33 pm

    Why should variable rate customers be treated any differently from tracker customers especially as the variable rate is on average more than double the tracker rate? I say good luck to tracker customers but there has to be fair treatment for all customers.

  18. James at 12:21 pm

    No, but you can bet your bottom dollar though that they, the (Banks) will all reduce the deposit interest rates that they offer on Savings and long term deposit accounts.
    At this stage it’s not worth having savings on deposit with the miniscule interest rates on offer and most especially being ripped off by the government to the tune of 30% DIRT.

  19. PD. at 12:02 pm

    Read the comments above, Tried to get a loan from the leading building society Ireland for a car and refused, Loan refused due to current econmy climate. Went into nearest branch to discuss same and got same answer. Never defaulted in payment with mortgage with same. When you look at the other banks passing on cuts it makes you think should you change banks. Very disappointed.

  20. Stephen at 11:43 am

    Most people do not understand bank funding costs. A drop in the ECB rate doesn’t impact them other than to increase the costs due to the trackers.

  21. Frank Bodley at 11:41 am

    AIB’s variable rates are 1.25% less than Ulsters who are the highest? AIB are not reducing but Ulster are but not enough?
    Trackers are costing the banks too much? There has to be a half way house!

  22. lizzie at 11:33 am

    Ireland should follow Iceland , fire the criminal government and jail the criminal bankers !

  23. Stephen Byrne at 11:30 am

    No, no and no. They should not pass on all the rate cuts, it’s not fair, and the government should not force the banks one way or the other.

    One of the key problems in the Irish economy is the lack of competition in the banking sector for both commercial and domestic business. The sooner more European or US banks open up offices here, the better, and any government interference will reduce the chances of that happening.

    Don’t get me wrong. The banking sector shouldn’t be the governments number one priority, but ultimately we need a competitive banking sector, which we don’t have currently.

  24. Denise Kirwan at 11:29 am

    The banks are shameful the should be cutting interest rates to help the economy recover as they have made money for long enough and played it like poker machines and were greedy they should be prepared to make less profit and help our country get back on its feet and an interest rate cut means people will spend more Take a leaf out of the Australian economy and sack all those involved in the scandles in banking in the 90’s to date

  25. TC at 11:12 am

    Cant have it both ways – expect banks to lend into economy AND give cheap tracker loans (and forgive all negative equity). Govt needs to legislate for tracker loans – we own banks now and those of us with variable loans are simply subsidising tracker loans

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