Sunday 19 November 2017

Consumer Champion: Banks offering bells and whistles, but ignore the din - stick to your tracker

Photo: Thinkstock
Photo: Thinkstock
Texting at the wheel. Photo posed.

Despite enforcement from the Central Bank, some banks are still playing customers as pawns in an effort to get them off tracker mortgages.

You'll recall the chap standing up on the bus, in an old ad for the Regulator, stating he didn't know what a tracker mortgage was.

Well, there can't be anybody left who doesn't realise their luck if they have one of these beleaguered products - which should never have been sold and which got banks into such dire straits.

Trackers get their name for 'tracking' the European Central Bank rate - the interest banks are charged to borrow money - passing it on at a tiny profit, to borrowers.


Introduced at a time of intense competition thousands of customers, spotting the benefit, switched. The problem is that while the customer fixed their rate for 20 or 25 years, the banks themselves have to re-borrow every few years, rolling over the debt.

As rates went up, their profit disappeared, leaving trackers owing money. Contractually, they couldn't get people off them, so variable rate (SVR) customers, who had no such lock-in, ended up subsidising the trackers.

A tracker rate could be as low as ECB rate (0.05pc) + 0.5pc - effectively 'free' money once inflation is taken into account; an SVR is anything from 3.8-4.25pc.

Look at it in money terms: for a loan of €200,000 over 20 years, the monthly repayment is €821.44 per month (pm) on a tracker. Even a competitive variable rate of 3.8pc brings that to €1,164.89pm, or a difference of €4,121.44 per year. So, when a bank writes to customers 'enticing' them with fixed-rate options, not only are they breaking Central Bank rules but they're diddling customers in the long term. In this case, you'd want to be offered a whopping €82,428 over the mortgage lifetime to make it worthwhile to switch from the tracker.

But it seems some banks didn't get the memo. PTSB has 1,372 customers it refused returns to trackers they were entitled to and many lost money, and even their homes.

AIB has been accused of doing the same with 3,000 customers while Bank of Ireland has denied sending out enticement letters to its tracker customers recommending fixed rate loans, but campaigner David Hall says he has "no doubt at all" this is happening. If you're restructuring a mortgage it's "a given" you'll lose your tracker with BOI, he adds.

Ulster Bank for its part has started offering 'portable' trackers to those in negative equity who need to trade-up. While the product is good, letting people hang onto their tracker when they move, their rate will increase to 2-2.5pc over ECB and only for 10 years; this allows the bank a profit they didn't have. Any balance borrowed will be on full Variable Rates, however.


If you have a tracker and get a letter from your bank suggesting you ditch it, switch it, or change it in any way, irrespective of the incentive offered, you should not only not respond, but contact the Financial Services Ombudsman. This practice is banned and banks severely reprimanded. Do they care? Well it's gloves off as trackers continue to pose the biggest threat to their balance sheets.

For those on SVRs, switching remains a great option - see the table for what are good offers!


Insurers driving a hard bargain

Texting at the wheel. Photo posed.

Motorists will be alarmed when they receive their insurance renewal letters with massive hikes predicted across the board. FBD, a market leader through its No Nonsense brand, has had its worst claims year in its 40-year history.

It increased premiums by over 20pc last year and will do so again by 10pc this year. It's not alone - hikes will be the order of the day across all major insurers.

The main reason is due to the highly litigious system we have here. Court trials are expensive and lengthy and we're undertaking more of them. There is no standardised system, as they have in other countries, of specific payments for injuries from motor accidents - every case is fought individually.

There's a lot of scamming in this market too - fraud makes up a big part of your premium increase even if you wouldn't dream of it yourself, everyone gets loaded.

The best way to keep your costs down is to shop around. There is zero benefit in company 'loyalty' any more. You can carry your No Claims Bonus with you (your insurer must send you it 28 days before renewal).

Other tips include having a second driver (cross-insuring partners on each other's cars actually brings down both premiums). Try bundling your motor and house insurance - most companies offer a discount. Finally, keep those penalty points away. While many insurers will ignore two, they'll hammer you for more than that.


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Travel has to be taken by 20 May 2016 so it gives you plenty of time to pack those bags and decide where to go.

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