Negative equity loans plan

Bank of Ireland’s new negative equity home loans will cost customers their valuable tracker mortgages, unless they are already in the bank’s mortgage arrears resolution programme.

The new mortgages are being introduced to allow mortgage holders to downsize or move home, but doing so will cost customers with performing mortgages their trackers.

Tracker mortgages have been costing banks millions as the rates borrowers are paying them are below the bank’s funding costs. The average tracker mortgage is worth about €50,000 to the borrower, the Irish Broker’s Association states.

Head of mortgages at Bank of Ireland, Jonathan Byrne, said the new product had been introduced to allow people burdened with negative equity to move home, not to get rid of tracker mortgages.

“We’ve had customers coming into the bank looking to move home, but without having savings in their accounts to be able to write a cheque for the negative equity in their homes. This encouraged us to go out and identify a solution.”

However, Mr Byrne said he did not expect there to be a huge uptake of negative equity mortgages. “We’ve had this product on limited availability last year and the uptake was relatively mute.”

Two types of negative equity mortgages will be offered.

The trade-up negative equity loan will enable customers who sell their home, and move to a higher value property, to carry over the negative equity to the new mortgage.

The trade-down option will allow customers in negative equity to sell their home and move to a lower value property, while carrying some negative equity to the new mortgage.