Q&A: Am I getting the best variable mortgage rate from my bank?

Plus: Can I still sell Verizon shares at special low cost?

While banks are scrupulous in letting you know that the rate on your loan has gone down (or up),  I cannot recall ever getting a letter saying you can get an even lower rate by switching to another, newer, product in the bank’s portfolio.

While banks are scrupulous in letting you know that the rate on your loan has gone down (or up), I cannot recall ever getting a letter saying you can get an even lower rate by switching to another, newer, product in the bank’s portfolio.

 

Q After my mortgage provider cut their interest rates last week, I cannot understand what rate I will be paying. I am on a variable rate mortgage rate and currently pay 3.65 per cent interest. The bank said they were cutting that by 0.25 per cent but I see other variable rates at the same bank that are as low as 3.1 per cent.

Should I approach the bank? These seem to be the same type of loans and I am concerned that I am being overcharged.

Ms M.McA., email

A The first thing to say is that you are not being overcharged. Judging by your figures, you are an AIB mortgage customer and you will be on their Standard Variable Rate. The prevailing rate is, as you say, 3.65 per cent. Following the bank’s announcement that it was cutting its variable rates by a quarter percentage point, the new rate on that loan from July 1st will be 3.4 per cent.

So far, so good.

However, AIB does also offer another type of variable rate product – the LTV, or loan to value, mortgage. This is a newer product and the rate you pay depends on the size of the mortgage relative to the value of your home.

It works in three bands. People with a mortgage of more than 80 per cent of the value of their home will currently pay 3.75 per cent. Those whose loan amounts to more than 50 per cent but less than or equal to 80 per cent of the property value pay 3.55 per cent and those whose loan is less than or equal to 50 per cent of the value of the home pay 3.35 per cent.

When the rate cut kicks in on July 1st, these loan rates will drop to 3.5 per cent, 3.3 per cent and 3.1 per cent respectively.

AIB is by no means the only bank offering different varieties of variable loan, though, as with other lenders, they may well not have got around to mentioning their availability to you.

The more cynical among us might suggest that this dicing and slicing of customers into different products is an approach designed to ensure that loyal customers in older legacy products end up padding bank margins to allow it to chase new business.

Certainly, while banks are scrupulous in letting you know that the rate on your loan has gone down (or up) to whatever the new prevailing rate is, I cannot recall ever getting a letter saying you can get an even lower rate by switching to another, newer, product in the bank’s portfolio. Interesting really.

To be fair, AIB were again the first to announce they were cutting rates in this cycle, as pressure looms on all lenders from the incoming Government for action on variable rates which are much higher in Ireland than in other European markets.

AIB has become something of a specialist in being the first, or among the first to move on rates, and it should be said that their rates are certainly competitive.

So where does all this leave you?

Well, as you are not on a fixed rate, it is open to you to switch to the LTV rate if that would save you money. Certainly if you have been paying the mortgage for some time and it currently stands at or below half the value of your home, such a move would be worth considering.

If you were minded to pursue such an option, you should just get in touch with the bank and work through the figures with them to calculate what saving it would deliver on your monthly mortgage bill.

In terms of associated costs, I understand the bank will need an updated valuation on your home to determine the current value (and thus which LTV band you fall into). The cost of getting such a valuation will clearly need to be factored into your calculation but, beyond that, I’m told there are no other costs involved.

Finally, while your mortgage is an AIB product, the same issue can arise for home loan customers at other banks and, with rates coming down in several of them, now is the time to contact lenders to check if they are on the best rate available.

Can I still sell mother’s Verizon shares on special low cost?

Q: I would be grateful if you could tell me if it is still possible to avail of selling Verizon shares without incurring trading and associated charges. I thought I heard something on the radio recently in relation to a cutoff date in May .

My elderly mother has less than 10 shares and would like to offload them. She has tried to contact the Verizon register line to do this but hasn’t been able to get anywhere.

Mr P.G., email

A: Unfortunately, the window for selling Verizon shares at a special low commission rate (not free of trading and associated charges) has closed since late February. That’s why there’s no answer on that dedicated help line.

The May date you heard about recently is in relation to a similar programme for Vodafone shares. Vodafone is offering small shareholders, mostly Irish, the opportunity to sell their shares at either no cost – if they hold fewer than 50 Vodafone shares – or at a lower than usual cost if they hold between 51 and 1,000 shares.

This is likely to be relevant to your mother. Assuming she got the Verizon shares as a result of originally investing in Eircom, she will also hold Vodafone stock, unless she has previously sold it. Back in early, 2014, Vodafone sold its US business to joint venture partner Verizon and Vodafone shareholders received - among other things - one Verizon share for roughly every 39 Vodafone shares held.

If your mother has 10 Verizon shares, it is quite possible that she owns just under 400 Vodafone shares, currently worth just over €1,100. It will cost her €42 in commission under the low-cost selling deal to offload them.

Yes, she will be making a loss but then the money has been locked up there for 16 years and shows no sign of making a gain.

The key thing to note is that she has to act fast if she wants to avail of this deal which closes this day week – May 24th – so her form will need to be in the past in the next couple of days.

And as for those Verizon shares – currently worth just under €450 – she will need to contact Computershare in the US +1 781 5753994 or by mail (Verizon Shareowner Services, c/o Computershare, PO Box 43078, Providence, RI 02940-3078, USA) to arrange their sale. There will be a cost involved.

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.

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