What is going to departure of Ulster Financial institution imply for our tracker mortgage?

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In gentle of the current cope with PTSB, what ought to we do to guard our tracker mortgage with the approaching closure of Ulster Financial institution?

Mr J.M., e-mail

It’s a time of nice uncertainty for Irish financial institution clients. Two main gamers are leaving the market and, even amongst these staying, there are department closures and different new preparations.

I’ve had a number of queries in current days regarding the departure of each Ulster Financial institution and KBC and what it means for Irish clients – particularly mortgage clients. I’ll attempt to cope with the Ulster Financial institution ones right here. I’ll attempt to come again to KBC subsequent week.

The underside line for Irish clients is that they’ll have much less alternative in banking and, the place mortgages are involved, they are going to be shedding two of the extra modern and aggressive gamers.

However it will be significant that persons are conscious each of their rights and the details.

The information final week that Everlasting TSB was going to buy a bit of Ulster Financial institution’s loans – €7.6 billion in worth – in a deal that can seemingly see Ulster Financial institution’s UK mother or father take a big stake within the Irish lender might have led you to consider that your mortgage might be heading for Everlasting TSB (PTSB) however that’s not the case.

Tracker loans

As my colleague Joe Brennan defined, the deal will see PTSB taking on a variety of various kinds of loans together with mortgages and small enterprise lending. Nevertheless, the mortgage e book that PTSB is buying particularly excludes Ulster Financial institution’s tracker loans.

Ulster’s tracker loans look destined as a substitute to finish up at AIB. As Joe reported final Friday, AIB is in talks to purchase Ulster’s €6.5 billion tracker mortgage mortgage e book. The principle subject is more likely to be worth. With ECB charges at zero, AIB will presumably count on to get the mortgage e book at a reduction.

So what does all that imply for you?

Effectively, nothing actually. No matter who buys your tracker mortgage, they’re obliged to honour the phrases of your mortgage. That signifies that, so long as you honour your funds, AIB (if that’s who finally buys the mortgage) must honour the phrases of the settlement you initially signed with Ulster.

So, in case your Ulster Financial institution mortgage contract says you pay an rate of interest of not more than 50 foundation level above the ECB charge – 0.5 of a proportion level – AIB, or whoever, can’t broaden that margin.

You don’t must do something to guard your tracker: it’s protected by the Central Financial institution and nothing that occurs with the closure of Ulster Financial institution in Eire will have an effect on that.

Offset mortgage

One other reader, Mr B.O’C. has an offset mortgage with Ulster Financial institution. His expertise proves my level on the Ulster Financial institution tracker. First Energetic was acquired by Ulster Financial institution in 2009, Ulster was obliged to honour the offset mortgage phrases although it didn’t provide that product itself on the time.

Mr B.O’C. has benefitted from that over the intervening 12 years with out drawback. However now, he’s questioning if the departure of Ulster Financial institution affords him a possibility. His mortgage stability is €265,000 and he has €227,000 within the offset financial savings account. This implies he’s presently paying curiosity solely on €38,000 of his mortgage mortgage.

He’s contemplating providing the financial institution the €227,000 as full and ultimate settlement of the mortgage and wonders is that this an possibility and, if that’s the case, is it a good suggestion?

There’s nothing to cease you making the provide however the query is whether or not it is going to be sufficient to fulfill Ulster Financial institution – or Everlasting TSB who might be taking on this mortgage.

You need to settle the mortgage at a reduction of virtually 15 per cent. Even permitting for the truth that PTSB is probably going shopping for the mortgage e book at some form of low cost, this may be a bit too far for them.

The opposite factor is that with all of the work concerned in breaking apart the financial institution and promoting components of the enterprise – together with branches – to varied consumers in advanced offers and tight timeframes (the PTSB deal is pencilled to finish this yr), will Ulster Financial institution even be ready to think about your provide? My guess is that they won’t entertain particular person pitches for mortgage settlement at the moment.

Even when that they had the sources to handle it, wholesale particular person settlements of loans may alter the dynamics of what PTSB thinks it’s shopping for, placing the association in jeopardy.

There’s no purpose why you can’t make the pitch however I can’t see the upside for Ulster Financial institution in accepting it at the moment.

Good thought?

Is it even a good suggestion for you? I believe it’s, so long as you shouldn’t have different, costlier private loans or bank card debt excellent – at Ulster Financial institution of elsewhere – or foresee the necessity to borrow. Mortgage debt stays by far the most cost effective borrowing for customers.

One more reason to think about such a transfer is that the rate of interest in your offset mortgage could possibly be greater at PTSB, as shopper activist Brendan Burgess has warned, and that may price you.

For lots of people the prospect of an rate of interest penalty – i.e. greater rates of interest – at PTSB will make switching to a different mortgage supplier after the deal is finished one thing they really want to think about. In your case, nonetheless, any transfer by you to change supplier would imply the tip of the offset association.

You’ll face curiosity on the total excellent mortgage stability of €265,000 somewhat than simply the €38,000 extra over your offset financial savings. That might see your annual curiosity invoice soar greater than fivefold – except in fact, you bodily use some or all of that €227,000 within the offset account to pay down a bit of the mortgage.

So, sure, actually make the provide to Ulster however don’t be stunned in the event that they fail to reply or reject it out of hand. There’s nothing to cease you making the same provide to PTSB as soon as the deal is finished however once more the chances are that it’s going to not be accepted. At that time you must crunch the numbers and see what is smart for you.

Mortgage lenders

AIB is the most important participant lately within the Irish mortgage market, even earlier than these closures. It’s adopted by Financial institution of Eire and, between them, they management greater than 50 per cent of the market – shut sufficient to 60 per cent in truth.

Everlasting TSB comes subsequent, with about 15 per cent of the market in line with monetary adviser Michael Dowling, although the financial institution studies it’s doing higher just lately, with nearly 18 per cent of the brand new mortgage market within the first quarter of this yr.

Ulster Financial institution additionally has about 15 per cent of the market with KBC simply above 10 per cent.

As of now, in case you are in search of a mortgage of 80 per cent or extra, AIB seems to be essentially the most aggressive, carefully adopted by Ulster Financial institution and Avant after which Everlasting TSB. Financial institution of Eire and AIB-owned EBS seem like the least aggressive.

For these with fairness of their properties – a mortgage to worth of 60 per cent or much less – who need to swap will discover Avant essentially the most aggressive, adopted by AIB and Ulster Financial institution. Once more, Financial institution of Eire and EBS seem to lag.

Please ship your queries to Dominic Coyle, Q&A, The Irish Instances, 24-28 Tara Road, Dublin 2, or e-mail dcoyle@irishtimes.com. This column is a reader service and isn’t supposed to interchange skilled recommendation. No private correspondence might be entered into

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