Advisors.ie

At the moment, the average drawdown is €188,000. According to Deeter, the ‘average mortgage’ from 2008 on a 2.1 per cent tracker costs €1,076 per month. Current TRS is €80 per month, so the net cost is €996.With the new, bigger TRS in the Programme for Government, the TRS will now be €119, resulting in a monthly payment of €957, an extra saving of €39 per month.

Compare that to the new first-time buyers, who will miss out on TRS. If they take out a loan for €188,000 at 4.3 per cent variable, their cost per month is €1,023.With rates likely to push up over 5 per cent, irrespective of the ECB, Deeter believes that, by this time next year, the divergence between the two mortgages could be as much as €150 a month, even though the average loan in 2011 is a notably smaller amount.

Over the lifetime of a mortgage, the effect of not having TRS for an average first-time buyer will add up to tens of thousands of euro. On the other side, the plight of the boom-time buyers may not be quite as bad as thought. Of the €113 billion in total residential lending, €65 billion is in tracker mortgages.

An analysis of the introduction and drawdown of tracker mortgages by Deeter indicates that the majority of buyers during the boom secured trackers. This gives them a great advantage over first-time buyers in the current market, where only more expensive variable rate products are available.

Cutting one of the few benefits available to future buyers in order to improve the position of people who purchased during the boom is highly questionable. Why punish the prudent who wisely opted not to buy during the bubble?