Permanent TSB offers sweetener to holders of tracker mortgages

HOMEOWNERS with plenty of cash will be the main benefactors of a sweetener for tracker mortgage holders on offer by Permanent TSB.

The bank said customers who make additional payments to their tracker mortgage accounts of €5,000 or multiples of €5,000 will receive bonus payments of 10% on their payments.

It is not available to those who make overpayment of less than €5,000 at a time.

However, director of the Irish Mortgage Corporation, Frank Conway said the offer is not suited to mortgage holders who only have a minimum cash reserve.

“For anyone with credit card debt, personal loans and other high-interest borrowings, I would recommend they pay off those debts first,” he said.

“It may be possible to earn more on a high-yield account than the net benefit of paying a lump-sum off a low-interest tracker mortgage,” Mr Conway added.

He said he would advise people to keep a lump sum of at least six months’ living costs as their rainy day account.

“Cash continues to be king and keeping a rainy day fund is more important than ever. The deal from the PTSB is one that benefits the truly cash-rich, and in this tough economy, cash really is king,” he said.

The offer is for residential, investment and commercial tracker mortgages and is available between now and the middle of June. The bank has set a limit of €500 million on the scheme.

It is also open to customers currently in arrears and the bonus payment will apply to payments made once the arrears have been cleared.

Chief executive of Permanent TSB, David Guinane, said it is a “significant innovation” by the bank which benefits both customers and the bank.

“It’s in both parties’ interests to reduce the amount of outstanding balances on tracker mortgages. We will continue to look for further innovations in relation to these and other products in the months ahead,” he said.

Mr Conway said tracker mortgage holders are already on the pig’s back and underpay for their borrowings by a “significant margin”.

Comparing the monthly repayments on a €200,000, 30-year mortgage, a tracker mortgage holder pays €764.49 per month on a 2.25% rate. A standard variable rate customer pays €1104.41 at 5.25%.

“A tracker mortgage holder is already paying about 30% discount compared to a standard variable rate mortgage holder for the same loan,” Mr Conway said.

“The offer from PTSB represents a decisive effort by the bank to bring in some extra funds as well as rid itself of some percentage of those tracker mortgages that have been bleeding it dry,” he added.

Chief executive of the Irish Brokers Association Ciaran Phelan said a young family with future financial needs is probably better off saving for future needs and keeping the tracker for as long as possible.

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