John F. Loughrey & Associates Ltd. t/a The Mortgage Centre is regulated by the Central Bank of Ireland.
A tracker mortgage is one that has an interest rate that ‘tracks’ the prevailing European Central Bank (ECB) interest rate. At the moment the ECB rate is 4.0% and if you have a mortgage that tracks the ECB rate at a margin of + .95% (example rate only rates vary) your mortgage interest rate will be 4.95%. As the ECB rate moves up and down, your tracker mortgage rate will automatically move up and down by the same amount.
What are the advantages of taking out a tracker mortgage over a standard variable rate mortgage?
A tracker mortgage is much more transparent than a ‘standard variable’ rate mortgage. If you have a tracker rate you will always be aware what your mortgage rate is, as the tracker margin will always stay the same. It also means that the rate will always move up or down when the ECB rate moves up or down. With the ‘standard variable’ rate mortgage there is no guarantee on the margin charged by the financial institution. It is also at their discretion when rate changes are passed on, as the standard variable does not track the ECB rate
What type of borrower would this type of mortgage be particularly suited to?
Tracker mortgages suit any borrower, and they are growing in popularity as customers recognise the benefits of tracking the ECB. The majority of people opting for a variable rate mortgage now are taking the tracker variable rate.
How long have they been available?
Tracker mortgages were introduced to the Irish market in 1999, they were relatively unknown at the time in Ireland, but had been used in the UK for many years. Virtually all financial institutions now offer a tracker mortgage.
What should I watch out for?
Tracker mortgages are so transparent; it makes life much easier when comparing different products. Watch out for the discounted tracker rates being offered and also what the rate will be after the discounted period finishes. Some financial institution may for example offer you a discount for the first year of 4.75% and state that your rate after the discounted period will be 1.25% above the ECB
So how do I know if my current variable mortgage is on a tracker rate?
You will need to contact you broker or financial institution and ask them to check it out. The majority of mortgages taken out prior to 2004 if on a variable rate are probably on a standard variable rate.
How do I know if I am getting the best deal?
By contacting The Mortgage Centre, Letterkenny, Co Donegal we will be able to check this for you and get you the best deals available. We are independent brokers, not tied to any financial intuitions. We currently have agencies with 19 lenders.
Please call us today on Lo Call 1890 518 518
Article by Fidelma McCarron, Qualifed Financial Advisor, John F. Loughrey & Associates Ltd. t/a The Mortgage Centre
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