Ulster Bank's proposal to deal with offset mortgages

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Indebadbooks said:
Yip that's correct but I doubt there would be too many at that craic. Wonder how they would calculate it. Would it go onto the 24 month pot and averaged out like the ex gratia. If so then it wouldn't equate to much really.
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It has been suggested that it would be calculated as the total interest saved for the remainder of the mortgage term based on the amount offset and not to exceed the total interest payable. Not sure how accurate this is though.

Based on my conversation with the FA from UB, I could still save all that interest by using the pay and redraw facility and drawing the funds out again is not subject to lending criteria, so effectively my money is always still available to me. But why then, are they paying tens of thousands in some cases, to mortgage holders for what they are suggesting is a small inconvenience?
The main differences I can see are that I have to manage the funds myself in such a way that doesn't trigger a redemption and that my available funds to redraw reduce as the mortgage reduces.

I haven't used the offset up to now and have a lump sum that I could use to fully offset for the remainder but the source of my funds doesn't fit their criteria so the conversation never really went any further than that. I'm uncomfortable with just accepting the basic offer I received as a result but not sure if theres a whole lot I can do about it?
 
Target106 said:
But why then, are they paying tens of thousands in some cases, to mortgage holders for what they are suggesting is a small inconvenience?
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I imagine because the 'pay and redraw' set up is easily operated by any bank on a basic mortgage, it will just sit as a credit until wanted back again, could be done this minute by many banks if they wanted without any major tech issues whereas offering a fully operational current account that also was tied to a mortgage for offsetting is a far bigger ask and would need more work by a bank. I'm no IT expert but I presume no bank is willing to pay money to set this sort of arrangement up for such a small number of accounts but they will be able to take on and manage the pay and redraw easily enough.
 
Monbretia said:
I imagine because the 'pay and redraw' set up is easily operated by any bank on a basic mortgage, it will just sit as a credit until wanted back again, could be done this minute by many banks if they wanted without any major tech issues whereas offering a fully operational current account that also was tied to a mortgage for offsetting is a far bigger ask and would need more work by a bank. I'm no IT expert but I presume no bank is willing to pay money to set this sort of arrangement up for such a small number of accounts but they will be able to take on and manage the pay and redraw easily enough.
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Also the whole capital requirement for loans that are out Vs deposits. I don't understand that either but it was a big sticking point for these mortgages.

With the offset the bank could have both large loans and large deposits they can't really do anything with. With pay and redraw you are taking both off their books.
 
Target106 said:
It has been suggested that it would be calculated as the total interest saved for the remainder of the mortgage term based on the amount offset and not to exceed the total interest payable. Not sure how accurate this is though.

Based on my conversation with the FA from UB, I could still save all that interest by using the pay and redraw facility and drawing the funds out again is not subject to lending criteria, so effectively my money is always still available to me. But why then, are they paying tens of thousands in some cases, to mortgage holders for what they are suggesting is a small inconvenience?
The main differences I can see are that I have to manage the funds myself in such a way that doesn't trigger a redemption and that my available funds to redraw reduce as the mortgage reduces.

I haven't used the offset up to now and have a lump sum that I could use to fully offset for the remainder but the source of my funds doesn't fit their criteria so the conversation never really went any further than that. I'm uncomfortable with just accepting the basic offer I received as a result but not sure if theres a whole lot I can do about it?
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Thanks target, did you request a callback from their helpline or how did you get in contact with this person who was familiar with the offset calculations specifically?
Thanks in advance
 
Indebadbooks said:
Thanks target, did you request a callback from their helpline or how did you get in contact with this person who was familiar with the offset calculations specifically?
Thanks in advance
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You're welcome. I rang the helpline and asked to speak to someone about the ex gratia payment and specifically, how it was calculated in relation to my mortgage. They took my details and a QFA rang me back the following morning.
 
Target106 said:
You're welcome. I rang the helpline and asked to speak to someone about the ex gratia payment and specifically, how it was calculated in relation to my mortgage. They took my details and a QFA rang me back the following morning.
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Great stuff thank you. I will do the same and try to get a calculation from them on an inheritance of 20k that I'm due soon. If its worth my while I will put it into the offset account and put it all against the mortgage in March r April and tie it all up before May.
 
Has anyone received tax advice re the money received from ulster bank? I have just received this today..........."It is subject to CGT as a capital sum derived from an asset, within TCA 1997 s 535. If the contingency materialises at some stage, a refund of CGT can be claimed under TCA 1997 s 562 even if the four year limit has passed (TCA 1997 s 562(3))"

Also...:So it may be worth getting a memo on this from a tax advisor to ensure done correctly. Simple math would be that you can offset the annual CGT allowance of 1,270 each, and then cut 33% for revenue."

Would love a second opinion from here
 
aidanc68 said:
If the contingency materialises at some stage,
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I'm confused by this piece. Does it mean that yes you must pay CGT now, but if you can show in the future that the predicted loss on which the payout was based occurred, and so there was no real gain, then you can claim a refund on the CGT? Hard to imagine how that would work. (If I'm even understanding it correctly.)
 
Im sorry..thats all i got ...the advice suggests that the payment is subject to capital gains tax ....people need to be aware of this..would love to see if others got the same advice (or asked for advice).. if my advice is correct then the money received from ulster bank is not as good as some think
 
Seems to be a lot of conflicting information out there including something along the lines that revenue had already communicated internally that these were not liable for CGT but still needed to be evaluated if they were liable for income tax purposes. The consensus of the snippets I have heard is that the payment will not be subject to tax.

But it’s all hearsay and I’m not gonna do anything until revenue come out with an official position on this.
 
What is the general consensus on how all of this has been handled? the basis for the calculations and in general, the changes being made? I know some people are getting big payouts but I imagine they are the few exceptions.

Are we being taken for a ride?
 
It may be a big payout. But if interest rates stay elevated and don't average the 4% Ulster bank are predicting then everyone will lose over the term
aidanc68 said:
Has anyone received tax advice re the money received from ulster bank? I have just received this today..........."It is subject to CGT as a capital sum derived from an asset, within TCA 1997 s 535. If the contingency materialises at some stage, a refund of CGT can be claimed under TCA 1997 s 562 even if the four year limit has passed (TCA 1997 s 562(3))"

Also...:So it may be worth getting a memo on this from a tax advisor to ensure done correctly. Simple math would be that you can offset the annual CGT allowance of 1,270 each, and then cut 33% for revenue."

Would love a second opinion from here
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Is your home an asset?
 
Technically we are getting what many would see as a big payout. But based on our plans for our finances over the remaining 18 years of our mortgage, my husband and I believe we will be worse off over the term, assuming an interest rate of 4%. Hard to see the payout as a taxable gain on an asset when we will potentially still incur a loss.

It’s a shame revenue haven’t issued a clear directive on this situation.
 
aidanc68 said:
Has anyone received tax advice re the money received from ulster bank? I have just received this today..........."It is subject to CGT as a capital sum derived from an asset, within TCA 1997 s 535. If the contingency materialises at some stage, a refund of CGT can be claimed under TCA 1997 s 562 even if the four year limit has passed (TCA 1997 s 562(3))"

Also...:So it may be worth getting a memo on this from a tax advisor to ensure done correctly. Simple math would be that you can offset the annual CGT allowance of 1,270 each, and then cut 33% for revenue."

Would love a second opinion from here
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My view (finance background) is that I would not agree with this advice as the TCA 1997 s 535 relates to capital sums received by means of compensation for any kind of damage or injury to an asset or for the loss, destruction or dissipation of an asset or for any depreciation or risk of depreciation of an asset.

In my opinion there is no damage or loss to the asset. The loss is due to the changes to the contract and the loss of benefit to us. The fact that they have calculated what the loss of offsetting would have been worth to each mortgage holder had the function been retained and are also “compensating” us for this loss of benefit up to a maximum of the future liability, demonstrates they are putting us back in the same position had they not changed the T&C’s.

As per the FA T&C Part A 3(a) you can only have an offset mortgage for personal use: “The Offset Arrangement is only available to you if you are entering into the Offset Arrangement for your personal purposes. You are not permitted to use the Offset Arrangement for any trade, profession or business purposes.”

Even if it is deemed to be taxable TCA 1997 s 536 allows you to defer it until the asset is disposed of. In this case this would be our principle private residence which qualifies for full tax relief providing you have lived in it for the entire period and the land is less than 1 acre.

If we look at the Central Bank Tracker Mortgage redress scheme 2015, UB appear to be following similar steps to the CB principles in the attached publication.

Even with this, I agree with oaraki, we should do reach out to or wait until revenue come out with an official position on this before doing anything.
 

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Aniascor said:
Technically we are getting what many would see as a big payout. But based on our plans for our finances over the remaining 18 years of our mortgage, my husband and I believe we will be worse off over the term, assuming an interest rate of 4%. Hard to see the payout as a taxable gain on an asset when we will potentially still incur a loss.

It’s a shame revenue haven’t issued a clear directive on this situation.
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That’s it. We could all be getting a bad deal out of this if the interest rates go a certain way.

If revenue do decide to tax this then I’d say a lot more people would be pissed off and challenge it. But that development might not happen for a couple of months whereby we might be right up against the May 23 deadline. At that stage people would have very little time or scope to challenge it.

Not saying this is what is going to happen but living in this country has turned me into a cynic.
 
Horseleap2004 said:
I recieved a cheque today, has this happened to anyone else as I thought it would be pais into our offsett account
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The advice was it would be paid by cheque if you no longer had an account licked to the offset facility. If you still have your account open, it's strange that it went out to you by cheque. I'm expecting my payment by cheque but haven't seen it yet.
 
Has anyone transferred out of the offset to another account. The app allows 1000 a day it seems. I havent got on web browser yet to check if the transfer allowance is a larger amount
 
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