Tracker Mortgage- Write down

Karlrove

Hi,I'm just wondering if anyone could either advise or PM me the number of a solicitor who has been dealing with this issue.

I have a tracker mortgage and my house is in negative equity. I owe 330k to the bank. The house is probably worth 160-180k currently.Imlucky to have a tracker rate but would it be possible to approach the bank about writing down the mortgage close to the selling point so I cn walk away? I'd be essentially trading in the tracker mortgage. Would the bank go for this since they are looking to get trackers off their books?

Jim2007

Karlrove wrote: »

Hi,I'm just wondering if anyone could either advise or PM me the number of a solicitor who has been dealing with this issue.

I have a tracker mortgage and my house is in negative equity. I owe 330k to the bank. The house is probably worth 160-180k currently.Imlucky to have a tracker rate but would it be possible to approach the bank about writing down the mortgage close to the selling point so I cn walk away? I'd be essentially trading in the tracker mortgage. Would the bank go for this since they are looking to get trackers off their books?

And what would be in it for them??? Could you pay the remainder off in full right away for instance...

Liam D Ferguson

I'm not aware of any banks offering to write off people's loans unless the loans are seriously impaired, i.e. you cannot make your repayments and there is very little chance of you being able to make your repayments in the future.

Stories about banks simply writing down loans just to get people off trackers have reached the status of urban myth at this stage. Permanent TSB offered a 10% reduction for a short period and then stopped.

By all means ask your bank to be sure, but don't expect a positive reply.

Nino Brown

Karlrove wrote: »

Hi,I'm just wondering if anyone could either advise or PM me the number of a solicitor who has been dealing with this issue.

I have a tracker mortgage and my house is in negative equity. I owe 330k to the bank. The house is probably worth 160-180k currently.Imlucky to have a tracker rate but would it be possible to approach the bank about writing down the mortgage close to the selling point so I cn walk away? I'd be essentially trading in the tracker mortgage. Would the bank go for this since they are looking to get trackers off their books?

What would be the logic behind that decision? To get your tracker off the books, they'd have to put a 170K loss on the books.

Karlrove

Are banks not loosing money on the tracker mortgages?

Nervous Wreck

Karlrove wrote: »

Are banks not loosing money on the tracker mortgages?

No, they're just not making as much on them as they would on a standard variable or fixed rate mtg.

murphaph

They are losing money on some trackers. They can't borrow as cheaply as they are forced to lend on the very low margin tracker products. The banks borrow at higher rates than the ecb base rate. They hope that in the future the ecb will raise rates to a point where the bank can borrow at lower cost than the then tracker rate as it was when trackers initially came to market.

Trackers in of themselves are not risky for the banks but they got so greedy for market share that they cut the margin to unsustainable levels in the boom. Trackers remain available in Germany for example but with 3% margin not 0.5% as was common enough in Ireland.

Vulcan Media

I would imagine banks are losing badly on trackers. At the moment Irish banks can only borrow at high interest rates to cover the loans issued for tracker mortages at less than 1% above ECB rates. Banks will lose close to 100% of a loan for 100,000 over 30 years on a tracker.
Simple maths, if your paying out 3% per year more then you are taking in over 30 years, thats a 90% loss. If banks took a write down of 50% of a mortgage which was the paid in full, they would be saving themselves a 40% loss and not 90%. (assuming parity stays the same between what there borrowing rates and tracker rates)

Pablo Sanchez

The ECB rate is not going to stay low forever.

Liam D Ferguson

Vulcan Media wrote: »

(assuming parity stays the same between what there borrowing rates and tracker rates)

That's the key point here - banks are assuming that it won't as the current situation is an anomaly.

I don't think anybody here knows exactly what rates banks are currently paying for money. Most banks source funding from a variety of sources. Let's assume that karlrove's bank is currently paying 2% per year more than the interest rate he's paying on his €330,000. I plucked that figure out of the sky. It could be lower or higher. Euribor 12 month rates are <0.6% at the moment.

So at the moment they're losing about €6,600 per year on his tracker. He'd like them to take a loss of €170,000. They're thinking...

(a) Taking a hit of €170,000 now is the equivalent of taking ths loss of 25 years' up-front. And...

(b) As he pays his mortgage, the balance gets lower and the amount they're losing gets lower.

(c) As the banking system slowly returns to normal and the rates at which they can refinance his loan get lower, the amount they're losing gets lower.

(d) At some point in the future, karlrovs's house may come back up in value and the mortgage will come down so that the negative equity will be cleared. For personal reasons, karlrove may decide to sell the property then and pay back what he owes in full.

Taxburden carrier

Pablo Sanchez wrote: »

The ECB rate is not going to stay low forever.

And when Germany decides to raise it to suit it's needs , the s&@t will really hit the fan here.

FaganJr

Taxburden carrier wrote: »

And when Germany decides to raise it to suit it's needs , the s&@t will really hit the fan here.

How so? Please explain? I've tracker and I intend to keep it until final payment is made. I can't lose.

Oral Surgeon

FaganJr wrote: »

How so? Please explain? I've tracker and I intend to keep it until final payment is made. I can't lose.

When the ecb rate goes up, so does your tracker...

FaganJr

Oral Surgeon wrote: »

When the ecb rate goes up, so does your tracker...

Yes and so does variable, which will always be higher than any tracker, and fix rates are a multitude higher by nature and revert to variable afterwards. Will never change from tracker.

murphaph

Taxburden carrier wrote: »

And when Germany decides to raise it to suit it's needs , the s&@t will really hit the fan here.

It's not that simple

Germany has nowhere near 30% of the voting rights of the ECB, despite providing 30% of the Eurozone's GDP. Germany is in fact severely under-represented for its size and economic importance. Germany puts up with these things because it is still doing penance for Adolf & Co. 60 years later.

Sorry if the facts get in the way of a rant about "ze Germans".

Alrite Chief

Really interesting topic and apologies for bumping it after 7 months but rather than start a new thread I will.

I read an article in the indo some time back giving examples of what a tracker is worth to a home owner. A 250k loan over 25 years between the current tracker rate at the time and the variable rate was almost 98k. So for every month the person stays in that mortgage they are costing the bank more. I do understand rates can/will change but is difficult to predict. Its a gamble.

So to make the 'deal' appeal to both parties rather than just walk away from the mortgage and sell up and go their separate ways why wouldn't the bank use this as an opportunity to have people trade up their home and tie them in to the variable rate. As long as the negative equity matches the potential saving on that tracker mortgage to the bank.

I hope I'm explaining this well enough but if you are sitting on a 250k mortgage in 98k of negative equity but getting you off a tracker saves 98k over the term. You then buy a new property for 250k but are on a variable rate the bank will be profiting more on the interest. Over the course of the rest of the term you'll pay the bank an extra 98k but are in a bigger home.