Will Ulster Bank closure put mortgage drawdown at risk?

Dominic Coyle answers reader queries on mortgages, savings and transferring accounts after bank decision to leave market

I’m in the process of moving house. We have an existing mortgage on our current property with Ulster Bank that we will be paying off as part of the move. The new mortgage we have arranged is with Ulster Bank as well.

We are getting concerned that, when it comes to draw down of our new mortgage, Ulster Bank might say to us that aren’t taking on the business they have agreed to at this point and the whole deal may break down. We’re at the point that everything has been agreed with the bank bar signing contracts and draw down?

Should we start looking for a new mortgage from another provider, or will Ulster Bank still be doing new mortgage business during its wind up? We are hoping to draw down in the next month to six week?

Mr N.B., email

Buying a new home is always a nerve-wracking business. and one of the worst elements is the worry over finance. Regardless of what reassurance your lender gives – whoever they are – there is always the holding of breath until the loan is eventually drawn down and handed over.

And with good reason. As we found out over the past year, a number of the banks happily gave agreement in principle on loans only to later baulk when it came to handing over the money. In some cases, they refused the drawdown entirely: in others, they sanctioned only a lower amount.

And it wasn’t only to people who suddenly found themselves in receipt of State support because their employers had decided to avail of the Covid temporary wage subsidy scheme, even though they were working as normal. It was also people still receiving full ages with no State support but who worked in areas banks had decided to consider at risk.

So it is a nervous time with good reason.

All we can say with certainty is that Ulster Bank has stated specifically that people who have secured approval in principle for a mortgage will still be able to draw down the loan, despite the announcement last week that it was winding up its Irish operation.

I don’t believe in trusting banks. It’s not just their fairly miserable record – it’s also the more practical issue that this is not a trust issue. Banks will look after their interests just as you should prioritise yours. And if we were in any doubt, the tracker loan fiasco should have been a salutary lesson about the true value of bank’s advertising platitudes and being there when we need them, or offering help with what matters or whatever other slogan you want.

Having said that, Ulster Bank is going to be a while getting wound down. They say it will be a matter of years; I suspect they will try to move more quickly but, for now, they say they are very much open for business. And, as there is little advantage to them having their 2,800 staff doing nothing for an extended period, I suspect they mean it – from a position of their own self interest.

They are looking to sell their assets, so there is no advantage to them in just running them down.

Also, you are an existing customer with an outstanding mortgage and (presumably) a good credit history, seeing as how they have approved the new loan. If they act silly buggers on drawdown, presumably the whole property transaction grinds to a halt and they don’t get the old mortgage paid down either.

The bank is still working out the mechanics of the wind down and that is going to take some time. I believe you will be alright in drawing down your home loan.

If you are really nervous, and especially if any delay could put at risk the deal on the home you expect to move into, you could at least start the process of looking elsewhere. Avant, the new arrival in the market, and KBC are offering rates that are possibly even more competitive than Ulster Bank although may be not as flexible.

Clearly, this uncertainty is the last thing you need but I think you should have confidence that the mortgage drawdown will be honoured as your circumstances have not changed since approval in principle was granted and the bank is on record as saying it is not pulling the plug on mortgage drawdowns – not yet, at any rate.

What happens if Ulster sells my tracker?

I have concerns regarding my tracker mortgage. I have six years left of a 25 year mortgage. How would I fare if another financial institution took over my mortgage. Would the tracker be interfered with?

Mr J.B., email

There’s a lot of customer uncertainty out there. People are not used to their bank suddenly telling them it is shutting down. Some will be looking at alternatives for their money; others wondering should they sit tight.

When it comes to trackers, the advice is definitely to do precisely nothing right now.

Tracker rates are, without question, the best mortgage rates on the market and probably unlikely to become available again in our lifetime. For those fortunate to have one, the priority is to ensure they keep it for as long as their home loan is outstanding.

If you choose to jump ship now and move your mortgage to another bank, you will undoubtedly lose the tracker, you will pay a higher interest rate for the remainder of your loan term and there will be no prospect of changing back.

Remaining with the bank means you keep your tracker rate and continue was you have been doing for the last 19 years.

And when the bank sells your loan? The bank will inevitably sell its mortgage loan book. The betting right now is that a chunk of it will end up with Permanent TSB. However, tracker mortgages as a loss-making business will not be very attractive to other lenders and may well be "securitised" – ie packaged and marketed to investors. A third option is that they are acquired by some private fund.

To you, it doesn’t matter. Your tracker rate is protected by law. Whoever acquires the loan book is obliged to honour the terms you have agreed with Ulster Bank – just as you are obliged to honour those same terms by continuing to pay down your home loan.

And of course, we have, as of now, no idea how long the whole wind-down process will take. Danske was still managing its mortgage book years after the retail bank closed in 2014. I think Ulster will want to be gone sooner rather than later, but there’s no guarantee they will get everything organised before the six years remaining on your loan passes.

Sit tight for now and do nothing. Whatever happens, your rate is secure.

Coming across the Border to open a new account

We live in Northern Ireland. I am a pensioner and both my wife and I hold Irish passports.

We sold a small property a few years ago in Spain and, because the exchange rate was not good at the time, and also the hassle of converting it, we decided to open an account in the Republic with Ulster Bank.

I now want to change over to AIB and transfer my monies from Ulster Bank in view of what is happening. Although AIB have a branch close to my branch of Ulster Bank, getting there to open an AIB account is a problem, being from the North of Ireland and the lockdown. Do you have any advice?

Mr D.S., email

I don’t think you’ve any need to worry. Level 5 lockdowns will hopefully be a distant memory by the time Ulster Bank gets round to shuttering its Irish business.

It has made it quite clear that, for now at least, it is business as usual and it has spoken of a wind-down process taking a number of years.

Bide your time. I expect you’ll be in a position to make the arrangements in person at AIB later this summer. In your position you will be vaccinated by that stage and, all going well, we might have caught up a little here by then so the risks will be noticeably reduced.

In the meantime, I’d contact them by phone – or check online – to make sure you know exactly what documentation, proof of ID and proof of address you will need. You really don’t want the hassle of making the trip only to find you are missing one essential piece of paperwork.

I’d do the same with Ulster Bank, although maybe closer to the time, so that you can smoothly transfer the funds and close your account with the bank down here.

Before someone else mentions it, it is true that AIB allows people to establish accounts online without physically turning up at the branch. But that applies only if you are living in the Republic, so, in your case, you will need to make a personal visit at some point.

When do I have to actually move my account?

I’m just wondering when Ulster Bank will actually be closing to customers? I am a little confused by the wind-down period or when do I need to move banks.

Ms D.M., email

It is indeed a little confusing because the bank has yet to clarify matters. They have said they will wind-down operations “over a number of years”, which is comforting but not exactly clear.

What is clear is that there is no urgency here. The bank has said it is operating as normal for now and that it will be in touch with customers. Much remains to be sorted – not least who is going to buy all Ulster Bank’s various loan books. I think you will have plenty of time to weigh up what other banks are offering and see what best suits your needs.

When Danske Bank announced in October 2013 that they were pulling their retail bank out of Ireland, they said they would give customers at least two months’ notice of any changes. In the end, they closed most customer accounts four months later with some remaining open for a further four months.

They also continued to manage any personal loans and mortgages until they were fully paid in line with the arrangements in place with customers.

Personal current account and deposit holders do not yet know what will happen or the timeline, but their accounts will close at some point.

I recall that, under Central Bank guidance, Danske did a lot of the niggly admin work when it came to switching personal accounts bank in 2014. There is now a Central Bank of Ireland code of conduct on the switching of payment accounts with payment service providers ; this sets the ground rules and all the banks to which you might consider moving your account should have a "switching pack" explaining the process in easy to understand terms.

They should also have information on exactly what they are prepared to offer – such as online banking options, overdrafts and, importantly, charging structure etc.

Importantly, Ulster Bank will be obliged to give you significant advance notice when you have to act to move the account.

If you have a loan with Ulster – for your home, an investment property, a car or whatever – that will be sold on to another group and you will have no choice over that. However, any new owner of the loan is obliged to abide by the loan contracts , so your terms and conditions won’t change.

So you have nothing to worry about just yet. We should all know more in the coming days and weeks.

Is Ulster Bank open to offers to pay off mortgage?

I’ve five years left on a tracker mortgage with Ulster Bank . I have the ability to pay the remainder of the mortgage off now in full. Do you think Ulster Bank would offer deals to clear these mortgages early or would they still charge me the same amount that would be due to the original end of term?

There is about €54,000 remaining and I’m currently overpaying it each month.

I do understand whoever takes it over will still have to honour my tracker but would be happy to clear if there was a benefit. Do you think it might be an option they offer or what are the consequences?

Ms A.O’B., email

Given the losses they are making on tracker mortgages, you would imagine all banks are in the business of making deals to get out from under them. It’s not something they’d advertise and I simply don’t know whether they would be open to such an approach.

Before you rush that fence, however, I do have to remind you that the tracker you have is the cheapest money you’ll ever borrow, and you should be very slow to get rid of it (or even overpay it) unless you never intend borrowing for as much as a car down the line.

With everything the bank has on its plate right now – talking to multiple competing suitors for various elements of their loanbooks – I’m not sure that anyone in a decision-making capacity will be doing anything apart from crisis management around last week’s announcement for a while yet.

But the tracker loan book will not be one of the crown jewels. Ulster will need to work harder to find a solution for off-loading those loans . If you give it a bit of time for things to settle down, it is possible the bank would be open to considering an offer. Clearly it only makes sense for you if you are getting a discount.

The question is whether the bank considers it is worth its while to engage at all on a piecemeal basis with tracker customers. We have seen in the past where banks have ignored individual offers on soured loans even where it means they would get a better return than the discounted rate they eventually receive from private equity funds.

Will they bite? No guarantee. Of course, even if Ulster refuse to engage, it will always be open to you to talk to whoever takes over the loan – assuming it is not simply securitised, which is a possibility.

The bottom line is that you don’t lose anything by asking them – not least as they’ve made it clear they’re not hanging around, so there’s no worry about impacting a future relationship. I’d leave it wait a couple of weeks though, until the dust from this announcement dies down.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into