Am I crazy switching to an Ulster Bank mortgage?
We are actually considering moving our mortgage from Bank of Ireland to Ulster Bank to take advantage of the five year fixed rate hinge.
Ulster Bank’s financial advisor stated that we cannot overpay the mortgage monthly, but we can pay off 10 percent of the outstanding balance every 12 months. This is something that we believe we will have the funds for each year and naturally reduce the term of the mortgage and the total interest payments.
My question is, do we still have this option if our mortgage is resold to another financial institution?
With all this uncertainty, do you think it would be crazy to consider moving to Ulster Bank?
Mr EC, email
You have to wonder what Ulster Bank’s parent company, NatWest Bank, was thinking when it found out it was reviewing its operations in the Republic. Not to take away our own Joe Brennan who told the story, but this type of internal discussion is inherently sensitive enough that one can imagine the bank would better keep their cards near their chest.
It certainly managed to be resolutely Sphinx-like despite a flurry of inquiries from its concerned customers.
If Ulster has a five year interest rate that is better than anything else currently on offer elsewhere, then this is where you should go
The move has fundamentally undermined the position of bank chief Jane Howard and also of Ruairí O’Flynn, who was appointed chairman in September. And it didn’t help that the deadline for making a decision on the subject has slipped so far that it is now indefinite.
Unsurprisingly, the result was a tsunami of uncertainty among existing customers and also among those whose business the bank would like to attract.
The bank’s position and its ongoing official statement that its strategy of “growing the bank organically and safely” remains unchanged is not supported by a history of high costs and poor profitability in the Irish market.
Ulster Bank, like its peers, is still recovering from the financial crisis and the financial and reputational wounds of the tracker mortgage crisis. Now another wave of bad debts threatens as a result of the Covid-related closings of large branches of the economy.
It also suffered from a lack of investment, especially in its technology, so that customers have been locked out of their accounts several times in recent years.
All in all, hardly a glowing confirmation. To be fair, his rival’s rap sheet isn’t that much more impressive.
So what should you do about your planned move? You should be doing exactly what makes financial sense at this moment. And if Ulster has a five year interest rate that is better than anything else currently on offer elsewhere, then this is where you should go.
Is that a crazy move given the bank’s current circumstances? Not in the least, as I’ll explain in a moment.
The bigger question, assuming you’re open to switching from the Bank of Ireland – hardly surprising since their mortgage offering doesn’t seem competitive right now – is whether you can do better elsewhere.
I have no idea about the outstanding credit or the term of your loan or the value and location of the property, but a quick review of the interest rates shows that Ulsters 2.6 percent is still below the 2.2 percent offered by Avant If You Will The loan is less than 80 percent of the loan-to-value.
It’s also shy of the rates that Finance Ireland, ICS Mortgages, Haven, and AIB are offering to new customers – and even Avant for loans over 80 percent LTV.
Any mortgage contract you sign must be respected by whoever accepts that part of their loan book
If you live outside of certain areas, Avant may not be an option. And you mention Ulster Bank’s assurance that you can make a lump sum overpayment once a year that the others may not meet,
Run your numbers yourself through a site like bonkers.ie and see what adds up or not.
However, if Ulster Bank is the most suitable option for your needs, the current uncertainty shouldn’t put you off.
The bank only talks about its future. It has not made any decisions and may still choose to remain active in the Irish market. This is not the first time its continued presence in the republic has been called into question.
More importantly, any mortgage contract you sign must be respected by whoever takes that part of their loan book, even if they decide to leave. No new owner can just come and tear up your five-year contract and the terms in it, any more than you can just decide you’re tired of paying a certain price and choose to pay less.
The interest rate you have agreed for each term and with all additional conditions – including the annual lump sum payment – is therefore binding for everyone who controls this loan until the time limit expires.
My only advice would be to make sure that the contract you need to sign is clear and in particular includes / excludes anything that you think you have agreed to
Any new owner of the bank or the mortgage loan book can offer their own alternative rates at this point – unless your mortgage contract entitles you to a later rate, which is unlikely today. If you don’t find them attractive, you can always consider switching again.
You particularly like the possibility of Ulster Bank paying you off up to 10 percent of the outstanding balance once a year during your five-year fixed term.
It certainly gives you some flexibility on a term loan without having to repay more than you think is comfortable given the uncertainty we all face in this current wave of Covid-19 restrictions and economic lockdowns .
My only advice would be to make sure that the contract you need to sign is clear and in particular includes / excludes anything that you think you have agreed to. Verbal assurances count for nothing in banking. The reason all banks found themselves ripped off by the tracker mortgage and other scandals was because of written terms and conditions or written representations that were withheld by customers.
In any case, outside of a catastrophic breakdown, closing a bank is not an overnight thing. It will take months, maybe years, to shut down the bank and move all customers, assets, and loans to third-party providers. You may even have reached the end of your five-year term.
If NatWest decides to unplug Ulster Bank in the Republic, the process will be overseen by the Central Bank as the regulator. Consumers have rights and you won’t lose anything if you switch mortgages now. The only question is whether this is the right step for you.
Please send your questions to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email [email protected] This column is a reader service and is not intended to replace professional advice. No personal correspondence will be conducted.