We are actually thinking of switching our mortgage to Ulster Bank from Bank of Ireland to take advantage of the five-year fixed rate.
The Ulster Bank financial adviser stated that we cannot overpay the mortgage on a monthly basis but that we could pay off 10 per cent of the outstanding balance once every 12 months. This is something that we think we will have the funds for each year and will obviously reduce the term of the mortgage and overall interest payments.
My question is: will this option still be open to us if our mortgage is sold on to another financial institution?
Do you think it is crazy to consider moving to Ulster Bank when all this uncertainty is going on?
Mr EC, email
You have to wonder what Ulster Bank's parent, NatWest bank, was thinking of when it let it slip that it was reviewing its operations in the Republic. Not taking away from our own Joe Brennan, who broke the story, but this sort of in-house discussion is, by nature so sensitive that you would imagine the bank would make a better job of keeping its cards close to its chest.
It has certainly managed to be resolutely Sphinx-like in the face of a flood of queries from its worried customers since.
If Ulster has a five-year rate that is better than anything on offer elsewhere right now, then that is where you should go
The move has fundamentally undermined the position of the bank's chief executive Jane Howard and also of Ruairí O'Flynn, the chairman who was installed only in September. And it hasn't been helped by the deadline for a decision on the issue slipping to the point where it is now open-ended.
The outcome, unsurprisingly, has been a tsunami of uncertainty among existing customers and also those whose business the bank is looking to attract.
The bank’s position, and its ongoing official line that its strategy to grow the bank “organically and safely remains unchanged” is not helped by a history of high costs and low 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 it faces into the prospect of another wave of bad debt as a result of the Covid-related shutdowns of large sectors of the economy.
It has also suffered from lack of investment, most particularly in its technology, with the result that customers have been locked out of their accounts on several occasions in recent years.
Hardly a glowing endorsement, all told. To be fair, the rap sheet of its rivals is not that much more impressive.
So what should you do about your proposed move? You should do precisely whatever makes financial sense at this moment. And if Ulster has a five-year rate that is better than anything on offer elsewhere right now, then that is where you should go.
Is it a crazy move to make in the bank’s current circumstances? Not in the slightest, as I will explain in a minute.
The bigger question, assuming you are open to moving from Bank of Ireland – hardly surprising as its mortgage offering does not appear to be competitive right now – is whether you can do better again elsewhere.
I have no idea of the outstanding borrowings or term of your loan, or the value and location of the property, but a quick check of the rates shows that Ulster's 2.6 per cent is still short of the 2.2 per cent on offer at Avant if your loan is less than 80 per cent loan to value.
It is also shy of the rates being offered to new customers by Finance Ireland, ICS Mortgages, Haven and AIB – and even Avant on loans above 80 per cent loan to value.
Any mortgage contract you sign will have to be respected by whoever takes over that part of their loan book
Now, if you are living outside certain areas, Avant might not be an option. And you do mention Ulster Bank’s assurance that you can make a lump sum overpayment once a year, which the others might not match,
Run your numbers through a site like bonkers.ie yourself and see what does, or does not, add up.
But, having said all that, if Ulster Bank is the option best-suited to your needs, the current uncertainty should not dissuade you one bit.
The bank is only talking about its future. It has made no decisions and it might yet decide to stay active in the Irish market. This is not the first time its continued presence in the Republic has come into question.
More importantly, even if it does decide to depart, any mortgage contract you sign will have to be respected by whoever takes over that part of their loan book. No new owner can simply come in and tear up your five-year deal and the conditions within it any more than you can simply decide you’re tired of paying a certain rate and choose to pay less.
So whatever interest rate you agree over whatever term and with whatever additional conditions – including the annual lump sum payment – will be binding on anyone controlling that loan until the fixed-term expires.
The one thing I would advise is to make sure that the contract you are given to sign is clear and specifically includes/excludes anything you feel you have agreed
At that stage any new owner of the bank or the mortgage loan book can offer its own alternative rates – unless your mortgage contract gives you rights to a subsequent type of rate, which is unlikely these days. If you don’t find them attractive, you can always consider switching again.
You seem particularly taken with the facility Ulster Bank is offering to pay off up to 10 per cent of the outstanding balance once a year during your five-year fixed term.
It certainly does give you a degree of flexibility in a fixed-term loan without obliging you to repay more than you might find comfortable given the uncertainty we all face in this current wave of Covid-19 restrictions and economic lockdowns.
The one thing I would advise is to make sure that the contract you are given to sign is clear and specifically includes/excludes anything you feel you have agreed. Verbal assurances count for nothing in banking. The reason all the banks found themselves hauled over the coals in the tracker mortgage and other scandals has been on the basis of written contract terms or written assurances retained by customers.
In any case, closing a bank outside of a catastrophic collapse is not an overnight affair. It will take months, maybe even years to run the bank down and get all customers, assets and loans allocated to other providers. You might even have reached the end of your five-year term.
If it happens that NatWest does decide to pull the plug on Ulster Bank in the Republic, the process will be overseen by the Central Bank as regulator. Consumers have rights and you will lose nothing by switching the mortgage now. The only question is whether it is the right move for you.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email email@example.com. This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into.