Tracker mortgage incentives
There is speculation that lenders will unveil measures in relation to tracker mortgages which in one shape or another will be designed to reduce the impact of tracker mortgages on lenders profitability.
Mortgage holders need to be careful not to be enticed by short term gains at the expense of long term savings.
Tracker mortgages are priced by reference to the ecb base rate (currently 1.25% )with a typical margin of 1% giving the customers a typical mortgage rate in today's market of 2.25% .Lenders are paying over 4% for funds and are therefore losing substantial money on trackers.
Permanent tsb are expected to be introducing some measures this week.The alternatives might include:
- A once off incentive to switch from a tracker rate to either a variable rate or a special fixed rate.
- A facility to increase the repayments on a tracker mortgage in return for a discount on the mortgage ( eg 5% discount on the loan balance)
We look forward to seeing the terms of any such incentives but we urge our tracker holders to exercise extreme caution and to seek independent advice especially if they are entering agreements with lenders as opposed to opt in incentives where there may be a benefit by following a particular course of action but no penalty ( eg loss of the tracker rate) if they opt back out.