Commission’s solutions to tracker mortgage crisis ‘politically difficult’

The European Commission has cited a number of “possible national solutions” to the tracker problem crippling the Irish banking system in its latest report on the Irish economy — ruling out official support from either the ESM or the ECB.

There are roughly €50bn of tracker mortgages spread across AIB, Bank of Ireland and Permanent TSB. These products track the main ECB interest rate, which is at a historic low of 25%. The banks’ cost of funding exceeds the returns on these trackers which is putting a huge drag on profitability.

The Irish Examiner reported at the time of the last troika in November that the Irish Government favoured a solution involving EU support. This included a series of guarantees from first the Government and then the ESM for the tracker mortgage books, which could then be used as collateral for the ECB’s long-term refinancing operation (LTRO). This would set up separate and cheap funding lines for the trackers. However, the ESM and ECB are both opposed to this proposal on the basis that it would set an unwanted precedent.