Freeing up families to move to suitable homes will benefit the housing market

THEY have been referred to as the locked-in generation. These are the people who bought houses during the boom, often purchasing a starter home in the hope of moving to more suitable accommodation to meet the needs of growing families.

But they found themselves trapped by a severe drop in income during the downturn, while the blight of negative equity has also restricted their options.

Most of these want-to-be movers have finally emerged from negative equity, with the value of their properties now higher than the loans they took out on them.

But anyone with a tracker mortgage was reluctant to move house – as they often faced having to give it up and switching to a mortgage type that was three times more expensive.

Again yesterday the Central Bank confirmed that we have the most expensive variable rates in the eurozone in this country.

It is a number of years since this journalist told readers they would be crackers to give up their trackers. That mantra has sunk in, but the entire situation has also acted as a brake on the mover market, prompting many potential property traders to stay put.

The attachment to trackers is the reason the theft of the low-rate mortgages from homeowners has been such a big issue.

It is expected that 40,000 homeowners will have a tracker rate returned to them, at a cost of more than €1bn to the banks, when the Central Bank-ordered probe into the scandal is finished.

People realise it is worth holding on to a tracker, especially as only this week borrowers were warned to prepare for an era of higher borrowing costs, as the European Central Bank gave the clearest signal yet that it will wind down its €30bn-amonth quantitative easing programme.

Mover-purchasers need a deposit of 20pc of the property’s value, but with negative equity having largely washed out of the system this is becoming less of an issue. The deposit can be put together from any profit they make from selling their original home, or from cash that has been saved.

Bank of Ireland’s decision to allow movers to hold on to their tracker rate should make it far more attractive for many of the tracker-trapped generation to trade up or down.

Movers will now be able to take their tracker rate on to a new property for the lifetime of the mortgage.

Up until now, people with a tracker who were moving house could only keep the Bank of Ireland tracker rate for five years.

There will be a 1pc premium added to the tracker rate, but it will still mean people will be paying far less than the variable rate on the tracker bit they transfer to the new property.

Bank of Ireland is reacting to the fact that many of its thousands of tracker customers are reluctant to lose their good-value rate after five years if they move.

AIB Group, KBC and Permanent TSB already allow mover-purchasers to keep the tracker element of their borrowing for the term of that mortgage, something that has put competitive pressure on Bank of Ireland.

Ulster Bank is now out of step, as it only offers a 10year tracker porting product.

Trackers have acted as a brake on home mover market