Implications for mortgage holders of rumoured Ulster Bank pull out

[Coldwarrior]

A mortgage is a legally binding contract that won't change no matter what happens to Ulster Bank.

This is true but it's not the panacea it's made out to be, there's still an added risk for UB customers.

For example, people who currently have a mortgage with UB on a decent fixed rate, who are able to fully meet the repayments etc but for whatever reason can't switch lenders at the end of the fixed term (eg needed an exemption which the other banks may not be willing to give, or a change in circumstances like now having more kids). If their mortgage is sold to a non bank entity or vulture fund that doesn't offer mortgages themselves to new customers, they have no incentive to keep up with the market and offer competitive interest rates.

So if interest rates offered by the other banks generally dropped say 1%, the vulture fund is very unlikely to compete and match these, leaving the original UB customers paying way over the odds rates. I also don't believe there'd be anything to stop the vulture fund from increasing the variable rate that UB customers on fixed rates roll off to and thereby price gouging these UB customers who are stuck with them.

 

[MrEarl]

Don't you think that people will be paying down their loans over the coming years, while on their fixed rates, so will be more likely to be able to refinance in future years, if they did get an exemption ?

Anyone on an SVR, who is unable to move lender, due to their personal circumstances, is exposed to the same risk of rates going up.

Any Bank can sell a loan portfolio, be it performing or otherwise. We've seen every Bank in the county sell loan portfolios, at this stage. Once their loan documentation allows for it, it's a risk, no matter who your lender is - with loan portfolios sold off for more than one reason.

If anything, being on a good medium to long term fixed rate, might give additional comfort, for those afraid of their rates going up, in the future.

 

[skrooge]

I wonder what impact, if any, would a loan book sale have on a break fees calculations?

I presume a sale only changes one factor, namely the current "bank" funding cost? Or am I missing something.

Given the potential buyer might not be a bank might current funding costs be significantly different from what Ulster Bank faced at origination.

Be interested to hear how this worked in the case of other loan sale.

 

[MrEarl]

While no one can predict the future, people with various "what if" questions about their loans, would benefit from reading other threads on AAM, about what happened when Danske, Bank of Scotland and Rabobank sold loan portfolios.

 

[demoivre]

This is true but it's not the panacea it's made out to be, there's still an added risk for UB customers.

For example, people who currently have a mortgage with UB on a decent fixed rate, who are able to fully meet the repayments etc but for whatever reason can't switch lenders at the end of the fixed term (eg needed an exemption which the other banks may not be willing to give, or a change in circumstances like now having more kids). If their mortgage is sold to a non bank entity or vulture fund that doesn't offer mortgages themselves to new customers, they have no incentive to keep up with the market and offer competitive interest rates.

So if interest rates offered by the other banks generally dropped say 1%, the vulture fund is very unlikely to compete and match these, leaving the original UB customers paying way over the odds rates. I also don't believe there'd be anything to stop the vulture fund from increasing the variable rate that UB customers on fixed rates roll off to and thereby price gouging these UB customers who are stuck with them.

A non tracker variable rate puts you at the mercy of the entity you are dealing with, irrespective of who they are.

Plenty of borrowers out there being fleeced by Banks with svrs of >4% , and those borrowers unable to switch for the reasons you've alluded to above.

 

[Coldwarrior]

A non tracker variable rate puts you at the mercy of the entity you are dealing with, irrespective of who they are.

Plenty of borrowers out there being fleeced by Banks with svrs of >4% , and those borrowers unable to switch for the reasons you've alluded to above.

Agreed but they have the option to fix for a better rate with their current bank, and competitive pressures mean those rates have to stay at least somewhat in line the other banks. Would a non bank entity even offer fixed rates to customers rolling off their current fixed periods?

 

[Coldwarrior]

Don't you think that people will be paying down their loans over the coming years, while on their fixed rates, so will be more likely to be able to refinance in future years, if they did get an exemption ?

More likely yes, I didn't say this would affect all UB customers, but there's a subset that that it could.

Anyone on an SVR, who is unable to move lender, due to their personal circumstances, is exposed to the same risk of rates going up.

As mentioned in previous post, they can at least usually get a decent fixed rate with their current bank if they can't switch, whereas a vulture fund wouldn't be competing for new business with the banks so wouldn't need to offer competitive rates.

 

[SeanWal]

We are currently one year into a two year fixed rate with Ulster Bank. Would it be better to switch from Ulster Bank now rather potentially being unable to switch in a year (due to a change in personal circumstances) and being at the mercy of unknown follow on rates of a new lender?

 

[finlma]

Lone Star are being linked with the takeover of UB. Any ideas of the implications for mortgage holders if this came to pass?

The end of UB in Ireland seems an inevitability now.

 

[MrEarl]

Until there's an announcement of any sort, this is all just speculation (granted, it does look like there's an announcement of some sort, on the way).

Interesting to note that UB are still opening new accounts, granting new loans, have been updating their app etc.

We've seen serval parties linked with Ulster Bank, with the news stories offering limited detail. Even if all of the stories are accurate, implications are that discussions are at a very early stage, with all of the parties named.

Assuming your homeloan is up to date, then nothing would change, even if UB did sell it to another party. If its not up to date, you continue to benefit from Irish regulatory and legal protections.

 

[Coldwarrior]

If your UB mortgage was sold to a "vulture" fund, would another negative implication be that they may not provide top up mortgages for people looking to renovate or expand their home? Not sure if these funds would allow something like this, I guess most of the current loans that have been bought by vultures have been in default so the mortgage holders wouldn't be looking to increase their mortgage.

 

[Eureka101]

It would be great to know what percentage of each Vulture fund’s loan book are performing versus the percentage that are non-performing.
Take it from me, if your mortgage is sold to a fund it simply becomes an overpriced loan with no mortgage facilities or services you would expect from a bank.
If you can switch then great, if you can’t then you’re mortgage journey becomes mired.

 

[Gordon Gekko]

It will be a bit of a nuisance for sure if it comes to pass. I’m with UB as I like the rates and the flexibility in terms of overpaying.

 

[finlma]

If your UB mortgage was sold to a "vulture" fund, would another negative implication be that they may not provide top up mortgages for people looking to renovate or expand their home? Not sure if these funds would allow something like this, I guess most of the current loans that have been bought by vultures have been in default so the mortgage holders wouldn't be looking to increase their mortgage.

I have a tracker with them but looking to move within next 5 years. Hoping to port the remaining amount at an increased rate for 10 years, as per UB current offer. All depends on who takes over the loan book I suppose.

 

[RedOnion]

If UB move my loan to another Fund/Bank/Vulture etc, I wont be guaranteed the ability to overpay?

Th overpayment option is contractual, and is part of your fixed rate agreement. The loan moving to another lender won't change the contract.
The first time a change could be introduced would be as part of a new fixed rate agreement.

 

[Gordon Gekko]

The big potential problem arises for people who reach the end of their fixed term or who are on a variable rate AND who can’t switch for whatever reason in circumstances where the purchaser’s offering is worse than Ulster Bank’s.

If you’re in the middle of a fixed term, as I am, you’re fine for the moment. Your rate will continue to apply and you can continue to make your 10% overpayments.

The issue is, where does the book end-up and what terms might that purchaser be offering thereafter. If the terms change and they’re rubbish, most people can simply switch. But for people who can’t switch, for whatever reason, they’re a captured audience and subject to the vagaries of whatever’s on offer from the purchaser.

I suppose it’s possible that decent terms could be on offer. For example, if Avant Money took over the book or parts of it. When you stand back from it, why would a purchaser look to wreck the business that it has purchased. If they mess people around, the performing customers will hit the road leaving them with a rump of distressed or somewhat distressed borrowers. Why would they do that?

 

[Ariel7]

I'm shortly due to finish a fixed term with UB and was contemplating re fixing at their 2.2 high value 5 year rate. Now I'm not sure whether to do this or not. The rate is competitive and would save having to move, also I love the reassurance of a fixed rate for 5 years while kids are small etc. Just a bit nervous now due to potential pull out. There's 27 years left on mortgage. Can't see our personal circumstances changing in next 5 years as we are both public sector workers, happy in jobs etc so could hopefully move at end of term if we needed to. Just wondering what people think? The gist of what I have read here on this thread is that if your mortgage is performing and you can move at end of term then there is no issue really if mortgage is sold?

 

[RedOnion]

I fully agree with the points raised by @MrEarl and @Gordon Gekko

What we have to remember is this is all purely speculation at the moment.

That said, all the other banks would be salivating at the idea of getting their hands on UBs performing loan book at the moment. It would be a quick & cheap way to massively increase their balance sheets with low risk lending, at a time they've excess deposits. If the book goes for sale, it will be incredibly competitive. The absolute worst case scenario for the other banks is the loans get sold to a fund, and the banks are left having to take on another 20bn + in deposits that they don't want.

 

[Gordon Gekko]

I'm shortly due to finish a fixed term with UB and was contemplating re fixing at their 2.2 high value 5 year rate. Now I'm not sure whether to do this or not. The rate is competitive and would save having to move, also I love the reassurance of a fixed rate for 5 years while kids are small etc. Just a bit nervous now due to potential pull out. There's 27 years left on mortgage. Can't see our personal circumstances changing in next 5 years as we are both public sector workers, happy in jobs etc so could hopefully move at end of term if we needed to. Just wondering what people think? The gist of what I have read here on this thread is that if your mortgage is performing and you can move at end of term then there is no issue really if mortgage is sold?

Hi,

What’s your Loan to Value (LTV)?

If it’s less than 60% and you don’t plan to make lump sum overpayments, you should consider switching to Avant Money now for their 1.95% fixed rate.

Otherwise, if it was me, I’d take the UB rate that’s on offer.

Gordon

 

[Ariel7]

Hi,

What’s your Loan to Value (LTV)?

If it’s less than 60% and you don’t plan to make lump sum overpayments, you should consider switching to Avant Money now for their 1.95% fixed rate.

Otherwise, if it was me, I’d take the UB rate that’s on offer.

Gordon

Thank you Gordon. Our LTV is 70% so Avant would only be matching the 2.2% rate I can get by re fixing with UB. Thanks for your response. Yes, Ulster are probably the best choice for us right now.