Is the bank being reasonable over mortgage change?

Dominic Coyle answers your personal finance questions.

I’d have taken the arm off any lender who was offering a tracker at less than one percentage point over the prevailing ECB rate

I’d have taken the arm off any lender who was offering a tracker at less than one percentage point over the prevailing ECB rate

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In October 2005 I purchased a home in which I still live. I got a 100 per cent mortgage from Ulster Bank. After three years I requested a change to a tracker mortgage and was granted ECB plus 0.8 per cent.

Since then I have got married and wish to add my husband’s name to the mortgage. However they wish me to draw down a new mortgage, with all the endless paperwork. The best rate I can get is ECB plus 2 per cent for 10 years and then a variable rate for the rest of the mortgage.

I would have thought that a second name on the mortgage would offer more security to the bank. Is the bank being reasonable?

Ms M.Q., email

Is the bank being reasonable? It doesn’t appear so.

You clearly are one of the lucky ones. I am assuming the terms of your initial 100 per cent mortgage offered you the prospect of switching at the end of a fixed term to a tracker at the ECB plus 0.8 of a percentage point rate. By late 2008, all the banks were heading for the exits on tracker rates. In fact Ulster Bank stopped offering trackers in September 2008. So, if you got a tracker at all it would have been before the third anniversary of the mortgage.

And even at that I’m astonished at the rate offered – especially on a 100 per cent mortgage. As someone who was in the residential mortgage market at this time, I can assure you I’d have taken the arm off any lender who was offering a tracker at less than one percentage point over the prevailing ECB rate.

Certainly, in most of the market if you could persuade the bank to agree at all to a tracker the margin they were requiring was generally significantly wider. And it was rising almost on a weekly basis as they scrambled to figure out how to make money from this type of mortgage.

So, well done you on that point.

Moving up to the present, you’re now married and still living in the same home. On a common sense level, it makes sense to add your husband to the mortgage. And you would imagine, from the bank’s point of view, that the added security makes sense.

However, it’s not that simple. To be fair to the bank, as of now it has no idea of your husband’s credit risk – his means, liabilities and possible previous credit history. And, unsurprisingly, they won’t take such details on trust.

Thus, it is not unusual that banks will require a remortgage in order to add someone’s name to the debt.

Of course, that doesn’t oblige them to charge more for the exercise. They could certainly charge the same rate and simply require you as a couple to meet the expense involved in satisfying them that he meets their credit risk standards.

I can obviously see the attraction from the bank’s perspective of taking advantage of the opportunity to improve their margin on this loan – at least from a purely business point of view. However, no one could characterise their approach under the terms of Ulster Bank’s most recent slogan – “Helping each other is help for what matters.”

In order to get access to greater security on the loan – assuming your husband meets the criteria – they are effectively more than doubling the interest you pay on your loan given the current ECB interest rate. And they are requiring you to sign away any rights to a tracker rate after 10 years.

How do you respond?

Simply thank them for the offer and tell them you’ll stay on your current rate with only you liable for the mortgage.

Mortgage rates – tracker, fixed and variable – are going to rise as the ECB rate rises in the years ahead. When they do your 0.8 percentage point tracker margin will seem even more of a good deal than it does now.

You can, of course, add you husband to the title deeds of the property. It will still require a solicitor but it is a straightforward process. It means he will share ownership of the property but he will not be liable for the mortgage. That, in itself, should wreck the heads of your friendly bankers in Ulster Bank.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice.

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