Tracker Fairytales


Tony Groves

In a land far, far away and in a time long, long ago there was a financial liquidity crisis. Now, the Banks, who were the pillars of this land, knew there was a problem. But they didn’t want to scare the All Powerful Boss, Mr Market.

No matter what, they had to retain his confidence.

Now the Banks had given out loans to people in what were called Tracker Mortgages. Theses, while things were good, were the engine of the bubble factory. But, when things went bad, these all burst leaving liquidity stains all over the balance sheets.

Luckily a White Knight, in the shape of (their equivalent of the ECB) Interest Rate Increases, rode into rescue our Pillars of Stability.

The Banks, quick as you like, seized on this opportunity and advised holders of Tracker Mortgages to protect themselves against the Rate Increases by signing what they called Fixed Rate Appendices. These were typically of between 3 and 5 years.

The holders availed of these more secure rates in their thousands. Wasn’t it the best advice and sure, didn’t the original loan offer that they had signed say that the Tracker Rate was “the underlying rate for the full term of the mortgage”?

Anyway, the White Knight of Rate Increases turned out to be a fraud. He was blindsided by a Dark Knight who gave himself the ungainly name The Global Financial Crisis, GFC for short.

The GFC went through the Bank’s Balance Sheets faster than Rating Agencies could downgrade Sovereign States. It was carnage. Interest Rates hit historic lows that would make a Trump approval rating seem good.

But remember those Fixed Rate people, with the underlying Tracker Rate?

What to do about them. The Banks were losing money hand over fist. They couldn’t afford to give people the Rates they’d agreed and the State sure didn’t want to have to put more money into the Banks.

I mean, these tens of thousands of people were on an average Rate of 4.75% and the Rate they were entitled to was about 1.15%; the Banks had a problem. Or did they…

You see, some clever clogs devised a way of removing the underlying rate issue. They came up with the “Suite of Options” letter.

This was a letter that went out to people about 30 days BEFORE their Fixed Rate expired. In the “Suite of Options” was a very basic offering:

Dear Sir or Madam,

You’re fixed rate is due to expire on date x

Please see our current rate options:
1yr Fixed at X%
2yr Fixed at X.X%
3yr yada yada
5yr jazz hands
Standard Variable at a little less than the fixed X.X%’s

Please tick the box you like, sign the bottom of the page and send it back to us in the prepaid envelope.

Many Thanks

Mr/Ms Pillar Bank

PS terms and conditions apply and there’s a brochure full of them and small print jargon etc etc. You look great, by the way. Have you lost weight?

So the letter went out and the Tracker Rate never even got included as an option. In fact, the Tracker Rate WAS the Do Nothing Option. If the customer didn’t complete the form their mortgage would automatically revert to the Tracker. This wasn’t in the Suite of Options.

Clever, no? It gets better, in the small print was a condition that allowed the bank to remove the original loan offers Tracker Rate “for the life of the mortgage” condition.

Now we had people, badly advised, voluntarily giving up their Tracker Mortgages, without ever knowing they’d volunteered. Genius, you can’t be up with them Bankers, I tells ya.

I’m not sure what happened next. I’d guess that everybody lived happily ever after.

I did read something about some people losing homes, having heart attacks and committing suicide over something to do with our Banks. But that’s not related to my fictional story. Not even a bit.

Besides, our stuff was just an administrative error? And sure, isn’t a 2 Bed portacabin in Ranelagh going for €600k nowadays. So, we are all sweet.

Aren’t we?

Tony Groves is a full-time financial consultant and part-time commentator. With over 18 years experience in the financial industry and a keen interest in politics, history and “being ornery”, he has published one book and writes regularly aTrickstersworld

15 thoughts on “Tracker Fairytales

  1. snowey

    full sympathy for the people in the story and the people in real life. I know 2 of them myself.

    my bank always told me , if I moved to a fixed rate my tracker would not be available.
    probably incorrect advice but in the long run better advice

    some of the stories are horrifying,
    people should be hung over this.

  2. Steve

    Also feel sorry for the bankstaff – front line tellers etc….they are usually the ones who get in the neck from Jonny righteous Public, relatives, friends, taxi “where do ye work” drivers.

    Great to have Leo and FG government finally getting going on addressing this mess. Woeful FF letting the practice start in the first place

    1. mkg985

      Whisper it, but it was the pesky Shinners who uncovered this. That nasty Pearse Pee Pee Doherty fella led the charge on this one. Bloody Shinners!

  3. phil

    But the central bank regulator , they have some interest (no pun intended) in what goes on in the banks don’t they ? Im probably not understanding the situation …. I hope someone tells the finance minister, about this , you know the fella elected by the people to look out for the people …

  4. Gringo

    Common thievery from the banksters as usual. Good thing white collar crime is no crime where these tramps are concerned.

    1. mkg985

      Because rates were on the up for nearly 2 years. They were expected to go higher before it all came crashing down.
      He’s a moan, but he’s right about this. People forget what happened here.

    2. Stephen

      Because at the time it seemed (and quite possibly was) like a smart choice, tracker was something like ECB rate +1%. So lets say ECB is 3% and has been steadily rising. Bank then offer to fix at 4% for next 3 years. This looks like a potentially good idea as it looks like your tracker rate will become greater than what you are fixing at. Also there is an element of it is nice to know exactly what your payments will be for budgeting.

      1. Peter Dempsey

        I took my chances and stayed on the tracker. Fixing rates is ultimately a cautious act and can backfire – to get out, there’s usually a penal break cost.

        Are there any instances of people losing their tracker mortgages who DIDN’T fix?

  5. Termagant

    What I don’t understand is how, in the face of rising ECB interest rates, it was in the bank’s interest to shift people onto fixed-rate.

    1. It Was All A Dream

      Because the banks goal was to take that customer from a tracker. Once you left the tracker rate, you weren’t allowed to go back. When the fixed period ended the rate would revert to a standard variable, or the mortgage holder would have the option to choose another fixed rate option.

  6. The Bottler

    AIB has defrauded the State on numerous occasions and no one has been accountable. Gerry Scanlan was one of the greatest shysters!

  7. TK ICkle

    Thank you for the summary, Tony. Any “news” I have heard on this didn’t actually go into the details, which would be fairly standard if you don’t want the masses to know what happened. I had a feeling people were tricked out of their trackers, but somehow the banks were legally covered, if you get what I mean.

    Thanks again!

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