Why am I paying 3.25% over ECB on tracker if others have 1% margin?

I took out a tracker mortgage with the TSB in May 2008. I checked the rate I was being charged and discovered that it is 3.25 percentage points over the European Central Bank (ECB) rate.

I enquired from associates what rates they were being charged and found that the rate varied from one percentage point to 1.5 per cent. It would appear that I am being charged an excessively high rate. Can I do anything about this?

Mr T.D., email

I doubt it. The attraction of tracker mortgages was that they were tied to ECB rates and the bank could not pad the margin to suit their own purposes. Their attraction was twofold – first, even when they came on the market a few enough people trusted banks to play fair in their relationship with borrowers; and, second, the margin over ECB was generally in the region of one to two percentage points.

At a time when rates were reasonably low – at least by Irish historical standards and trending lower – this seemed a great bet for borrowers. And, as the banks discovered to their cost, in their rush for market share, they ended up lending a lot of money that was soon to cost them more than they were earning in interest.

With Bear Stearns having collapsed in the United States on the back of its reckless property lending in March 2008, lenders were understandably pretty jittery. I had not realised until your email that the margin over ECB on tracker mortgages had jumped to 3.25 percentage points; in hindsight it seems incredible that banks were lending trackers at all at that stage but there you go.

The bottom line for you is that you were offered a rate at that stage and you chose to accept it and signed your mortgage agreement accordingly. The fact that other people who took out tracker mortgages at an earlier stage were paying a lower margin is immaterial.

You would have to prove mis-selling and, assuming the bank informed you of the margin – which must have been in the documents – and you signed to accept, I don’t see how you have a case.

I am aware, of course, that the courts have recently thrown back to the financial ombudsman a case in which a lender raised rates on a variable loan at a time when ECB rates had not risen. It remains to be seen what happens there.

Personally, I am not sure that a bank can be held to have acted unreasonably if a variable-rate contract allows it to adjust rates and if its financial position requires it to increase the margin it is charging on such loans; but we will see what happens.

In any case, I don’t see how it would apply to you. The bank has not adjusted the margin to its benefit in its loan with you: it is simply charging the agreed margin – albeit a higher margin than would have pertained if you had taken your mortgage out earlier.

And, even at 3.25 percentage points above the ECB rate, you still have, by historical standards, a very cheap mortgage in the Irish market. What rate of USC do over-70s pay? I am very confused by the recent changes in the universal social charge (USC). What I really need to know is what is the rate of USC when you are over 70 years old.

Mr N.H., email

It all depends on how much you “earn” in any given year.

Given that you are over 70, you are entitled to a lower rate of USC on your income as long as that income is less than €60,000 a year – a sum that will more than cover the vast majority of those over the age of 70.

At the moment, people in such a position would pay 2 per cent on all income up to €10.036 (assuming their income is above this level: if not, they pay nothing). On any income above this level, they pay 4 per cent. For those same people, the rate from January 2015 will be 1.5 per cent on the first €12,012 of income, and 3.5 per cent above that level.

But if you earn more than €60,000 annually, then you are in an entirely different situation and will be paying USC at the same rate as anyone else.

In practice what this means is that you will pay 1.5 per cent on the first €12,012, 3.5 per cent on the next €5,564 (up to income of €17,576) and 7 per cent from that income level up to a threshold of €70,044 – easy to remember numbers they certainly are not!

If you are in the PAYE system, the highest USC you can pay, regardless of income, is 8 per cent on anything above the €70,044 limit. However, if you have the misfortune to be self-employed – or otherwise self-assessed – you could face a USC rate as high as 11 per cent on any income above the €100,000 threshold. It is unlikely to affect you but that makes it none the less iniquitous, especially from a Government that makes a virtue of its efforts to create employment and encourage entrepreneurship.

What will bonus do to my USC? My yearly salary is €68,000 but with a yearly bonus in March of next year, it will likely go above the €70,000 for the year. How will my USC be impacted? Is it just at the point that I reach €70,000 that they start to take USC at 8 per cent?

Ms L.M., email

I don’t suppose there will be a lot of sympathy out there for people in the fortunate position to be looking forward to bonuses but the good news for you is that it should not be as bad as you fear.

It is indeed only income above the relevant threshold that is taxed at the higher rate under the universal social charge so, in your case, you will be paying 8 per cent only on any earnings in 2015 above the €70,044 level. Send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara St, D2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice.