Tracker Mortgages Information
Recently, borrowers with tracker mortgages have been congratulating themselves. The cost of the product is linked to the European Central Bank (ECB) rate of 1%, and this has stayed unchanged for a long time. Consequently, their monthly mortgage repayments have not changed. Unfortunately, variable rate mortgage holders are suffering rapid rate increases and spiralling monthly repayments.
However, things may have become even better for some tracker mortgage holders. In the recently published financial services ombudsman's report for 2009, a case study outlined by the Ombudsman, Mr William Prasifka, shows that the tracker mortgage contract is even stronger and even more enduring in the clients favour. In this particular case study, borrowers took out a tracker mortgage with a building society. Shortly after taking out the mortgage, the borrowers changed over to a two-year fixed rate. While the general market understanding has always been that the lender could then offer a variable rate to the client on the expiry of the fixed rate contract, the Ombudsman has now ruled that the building society is obliged to give the client a tracker rate at the original margin outlined in the original mortgage approval.
To read the case study in full, you can visit the Ombudsmans website and obtain a copy of the report, http://www.financialombudsman.ie/.
Frank Lenny, QFA, (LIAMdip)
August 2010.