Ulster Bank - will I lose my SVR -1.2% if I fix?

G

Gordon Gekko

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I still remain to be convinced that there’s not a sting in the tail for someone who’s already on one of UB’s “Loyalty Rates”.

These are quasi-trackers in that they’re a fixed margin below the bank’s SVR.

But what if the authorities cap the banks’ SVRs and limit UB’s SVR to (say) 3%? The contractual obligation to SVR minus (say) 1.2% could be incredibly valuable but (surely?) wouldn’t then be available at the expiry of the five year fixed term.
 
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OK, let's look at this.

Ulster Bank has an SVR of 4.3%
If you qualify for their Loyalty Plus variable rate of up to 60%, your rate is set at SVR - 1.3%
This is currently 3%

But if you fix for 4 years at 2.6%, what happens at the end of this period?
You will be able to apply for the best rate UB has available to their customers at that time.
Let's say that the best rate is SVR -0.8%. You will end up paying 0.5% more.

I don't really think that this should worry you too much. UB has a policy of making the best new customer rates available to existing customers, so they only way you would lose out would be if UB becomes un-competitive and if you can't switch to another lender.
 
Another possibility is that legislation may be brought in which would cap the SVR at, say 3%.

Therefore your current deal of SVR -1.3% would mean that Ulster Bank could charge you only 1.7%.

I suppose that this is possible, though, in my view, it is highly unlikely.

The current FF Bill proposes that the Central Bank may limit rates. It does not say that the SVR must be limited.

Most lenders no longer offer SVRs to new customers, so it would be pretty pointless basing the ceiling on SVR.

I don't think that the proposal to give control to the Central Bank will go through. I think that it will be capped in the legislation in some way.

For example, one of the following approaches might be taken:
1) The maximum rate a lender can charge is 3%
2) The maximum rate a lender can charge is ECB + 1% + x% loading for high LTV mortgages
3) The maximum rate a lender can charge is 33% above the average market rate

None of these approaches would affect you.
 
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One other option is that all variable rate prices would have to be based off a Standard Variable Rate.

Every bank publishes a SVR - say 4%
Then all mortgages would be be priced off that, as Ulster Bank is doing at present.
When lenders change the SVR, the rate would be changed for all customers automatically. (This would ensure that rate cuts would be passed on automatically to existing customers and protect people from the likes of KBC.)

If this were to become law, it would not affect you. The SVR itself could not be capped. Maybe the maximum rate could be capped at 4.5%, in which case UB would be able to issue mortgages at SVR +0.2%.

If such an SVR proposal were brought in along with a cap of 3.5%, how would this affect you?

Ulster could still have an SVR of 4.3% and give everyone at least a 0.8% discount off the SVR.

What I am saying is that it's very unlikely that any legislation could cap the SVR as such, so I don't think you need to worry.

Brendan
 
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