First Active launches tracker mortgage

FIRST ACTIVE will launch a cut-price tracker mortgage today that will target people trading up from their existing homes.

Tracker mortgages attract a fixed margin above the European Central Bank (ECB) rate and ensure that ECB rate increases or cuts are passed on in full to borrowers.

This is First Active’s first move into the tracker mortgage market, which is becoming increasingly popular among borrowers. While most lenders already provide at least one product that tracks the ECB rate, First Active will target borrowers taking out loans of at least €250,000, ruling most first-time buyers out.

First Active’s margin decreases in line with less risky loans that have lower loan-to-value (LTV) ratios. Borrowers who take out loans for less than 40% of their home’s value will benefit from a margin of 0.9% over the base rate, or 2.9% at the current base rate. The margin goes up to 1% for LTVs between 50% and 60%. Borrowers looking for more than 85% of the value of their home will be hit with a margin of 1.49%. Most first-time buyers take out loans for between 90% and 92% of the house price

First Active head of marketing Brendan O’Hora said the introduction of tracker mortgages meant First Active now had a full range of mortgage products for customers. “Our tracker mortgages will appeal especially to customers who are looking to trade up with high levels of equity, as these products have exceptionally competitive rates in the lower LTV bands,” said Mr O’Hora.

Mr O’Hora added that First Active’s current account mortgage, which allows customers to offset current account balances against the outstanding amount owed on their mortgage, remained the lender’s flagship product and had been very successful since its launch in early 2003. He said the product accounted for almost one-sixth of First Active mortgages last year.

First Active’s aggressive pricing for lower LTV mortgages brings it into direct competition with its new sister company Ulster Bank, following the completion of First Active’s takeover by Royal Bank of Scotland (RBS) last week.