Ulster Bank's proposal to deal with offset mortgages

[aoraki]

Ulster Bank seem to be quite sure about their legal entitlement to do this.

If they were so sure then why didn’t they just do this months/years ago? And why are they offering people goodwill payments, it’s not as if they are sticking around in the market and relying on peoples goodwill? And banks are not typically known for giving away money unnecessarily.

In the terms and conditions the sections they refer do have conditions that state that they are allowed to remove certain products/services from the Offset Arrangement if they need to. But there doesn’t seem to be any mention of removing the offset arrangement itself, which is what they are doing here.

I wonder if this will be challenged.

 

[peemac]

What are the tax implications here? Is the reason they doubling the payment, because we will have to pay half of it in tax?

They should be no tax implications as it is compensation for a loss or potential loss and as such is exempt from tax.

 

[HollyBud]

My tracker mortgage is still with Ulster Bank. Is it likely to be an offset mortgage?

 

[Monbretia]

My tracker mortgage is still with Ulster Bank. Is it likely to be an offset mortgage?

You would surely have noticed it on the correspondence about it at this stage? For starters you get statements far more frequently than an ordinary mortgage telling you what the offset part is saving you etc. If you made no use of that even there should still be correspondence. Can you look at it online? I think it's unlikely you have one and don't know, offsets are trackers but not all trackers are offsets.

 

[wannapress1]

Overall the news seems good but I'm sure there will be plenty of questions to be answered . No mention of the home mover benefit , I'd very surprised if that will still be an option going forward.

 

[aoraki]

Overall the news seems good but I'm sure there will be plenty of questions to be answered . No mention of the home mover benefit , I'd very surprised if that will still be an option going forward.

I've got quite a few questions myself but I'm going to wait until I get the letter to see what clarification that provides. It will probably lead to more questions though. Gonna reserve judgement on how good the news seems to be, I can see a couple of potential issues straight off the bat, including the possible removal of the home mover benefit like you mentioned but also how they are predicting future interest rates. I also want to find out more about the "Pay and Redraw" feature, is this something new that they added or was that always there? And if so how does it work in practicality.

 

[time to plan]

Ulster Bank are quite sure about their legal entitlement to do this.

If they were so sure then why didn’t they just do this months/years ago? And why are they offering people goodwill payments, it’s not as if they are sticking around in the market and relying on peoples goodwill? And banks are not typically known for giving away money unnecessarily.

In the terms and conditions the sections they refer do have conditions that state that they are allowed to remove certain products/services from the Offset Arrangement if they need to. But there doesn’t seem to be any mention of removing the offset arrangement itself, which is what they are doing here.

I wonder if this will be challenged.

It sounds like a deliberate breach of contract where they are trying to more than compensate customers for any losses they suffer through the breach.

But you would think the regulators could step in to stop the breach in the first case if it really is a breach of contract.

 

[Puddle duck]

I've got quite a few questions myself but I'm going to wait until I get the letter to see what clarification that provides. It will probably lead to more questions though. Gonna reserve judgement on how good the news seems to be, I can see a couple of potential issues straight off the bat, including the possible removal of the home mover benefit like you mentioned but also how they are predicting future interest rates. I also want to find out more about the "Pay and Redraw" feature, is this something new that they added or was that always there? And if so how does it work in practicality.

I think this is the feature that allowed you to 'draw down' overpaid mortgage like a mortgage top up and it was not subject to underwriting (no mention of that clause either). If you look at one of your mortgage letters 'an update on your available facility' will give you the balance that is available for you to drawn down/ top up your current mortgage. It reduces over the year. Always there... but curious what the new t's & c's will be on underwriting approval.

 

[so-crates]

My tracker mortgage is still with Ulster Bank. Is it likely to be an offset mortgage?

I'm in the same boat, whatever the delay is they haven't provided any update in months and never indicated that there was any particular issue. I'd be shocked if there was so I figure I am just at the end of a looooong queue!

 

[Aniascor]

Overall the news seems good but I'm sure there will be plenty of questions to be answered . No mention of the home mover benefit , I'd very surprised if that will still be an option going forward.

Interestingly, if you go to the Mortgages support page on the Ulster Bank website, it differentiates between Offset Mortgages and Current Account Mortgages. In the section on Current Account Mortgages, there's an FAQ about why you might want to switch your Current Account Mortgage to an Ulster Bank Flexible mortgage. In the response, it says:

Some other benefits of the Flexible Mortgage are:

a. You can keep the features mentioned above if you ever wish to move home (subject to credit approval for the property you would be proposing to purchase). With your Current Account Mortgage, you cannot keep your mortgage when you move home.

b. You can seek a top up to your mortgage, subject to credit approval. You cannot do this on the Current Account Mortgage.

That sounds to me like they are trying to standardise the features between the CAM and the Offset Mortgage. This "Flexible Mortgage" sounds like the Offset mortgage.

Whereas, in the Offset Mortgage FAQs, there is no mention at all of the home mover feature. We used the home mover for our offset within the last few years, and it is definitely noted as a feature in our T&Cs, so I'd expect it to be called out as a change in this press release if they intended to remove it. My assumption is that it will continue to be an option.

 

[Monbretia]

I think this is the feature that allowed you to 'draw down' overpaid mortgage like a mortgage top up and it was not subject to underwriting (no mention of that clause either). If you look at one of your mortgage letters 'an update on your available facility' will give you the balance that is available for you to drawn down/ top up your current mortgage. It reduces over the year. Always there... but curious what the new t's & c's will be on underwriting approval.

Available facilty is a different thing to 'pay and redraw', Available Facility is like an undrawn down amount of your mortgage than you draw without underwriting, it's not already a part of your mortgage in that you don't already owe that amount unless you draw it down.

What they are saying you can do now is say you have 10k, you can lodge it directly to the mortgage and if you need it again in 6 months time you can redraw it, you will have reduced your mortgage balance for 6 months and so saved some interest.

I spent years dealing with these mortgages and never came across anyone who used it that way, in fact I don't even recall that being a feature of the mortgage, sure what would be the point! You would have the same effect by putting the money in the facility/linked savings account so why go to the bother of lodging it directly to the mortgage. But obviously if that facility exists and is continuing then it's a version of offsetting, better suited obviously to lump sums than the day to day in and out of a current account.

 

[aoraki]

It sounds like a deliberate breach of contract where they are trying to more than compensate customers for any losses they suffer through the breach.

But you would think the regulators could step in to stop the breach in the first case if it really is a breach of contract.

If I was guessing I'd say that the Central Bank/Financial Regulator/Whoever have been in the loop with UB as they have been coming up with this plan. There's just too many moving parts to this particular issue and there's no way in hell the regulators are finding out about this solution today with the rest of us.

I think the argument could definitely be made that they are in breach of contract, but whether the CB or the regulators would back you up is another story. They might be happy to go along with it if UB are seen to be making an attempt to compensate folks. They also might see this "Pay and Redraw" feature as a fulfillment of the Offset Arrangement.

 

[Keninf]

Is there a minimum mortgage you could reduce it too. Could you effectively leave yourself with a 1K mortgage over 10 years.... Just to keep the line of preapproved credit open on a tracker rate.

 

[fliball123]

Hi all just some questions, surely the amount paid out no matter how much you have in your offset account has to be calculated as if the amount in your account matches what you have left to pay otherwise your not getting compensated for this option going forward fully. The Available facility will also have to be factored in and the option of the once off top up movers mortgage. There also needs to be clarity as to who is buying these mortgages and what interest rate will they be using

 

[aoraki]

Available facilty is a different thing to 'pay and redraw', Available Facility is like an undrawn down amount of your mortgage than you draw without underwriting, it's not already a part of your mortgage in that you don't already ow that amount unless you draw it down.

What they are saying you can do now is say you have 10k, you can lodge it directly to the mortgage and if you need it again in 6 months time you can redraw it, you will have reduced your mortgage balance for 6 months and so saved some interest.

I spent years dealing with these mortgages and never came across anyone who used it that way, in fact I don't even recall that being a feature of the mortgage, sure what would be the point! You would have the same effect by putting the money in the facility/linked savings account so why go to the bother of lodging it directly to the mortgage. But obviously if that facility exists and is continuing then it's a version of offsetting, better suited obviously to lump sums than the day to day in and out of a current account.

Yeah, the "Pay and Redraw" thing is a new one on me too. @Monbretia you seem to be the resident expert on these matters . So for arguments sake, consider the following scenario; you have an outstanding mortgage balance of 50 K, and you had 10 years left on your term. Your monthly repayment is 500 quid. You have 50K lying around (sure, who doesn't ).

• Could you lodge that 50K to your mortgage account without redeeming the mortgage?
• If your mortgage is fully offset in this way, do you still make monthly repayments against it?
• If there is only 1 account in play here (the actual mortgage account) how do they separate the mortgage balance vs the money that you are using to offset the mortgage? Is it through the available facility?
• How easy/difficult is it to take money out?

Basically what I'm trying to get at is whether it is possible to maintain your current mortgage and pay it off over the remaining term of the mortgage but offsetting it entirely for interest purposes. You might think, "sure just pay it off and be done with it". And that's certainly an option but there are a couple of potential advantages for keeping it going such as;

• You are basically availing of interest free credit for the duration of the term (if you can fully offset it, that is).
• Because you are not paying off your mortgage those savings are there for you to access should you really need them for some other purpose.
• You have access to the Available Facilty which you could use to boost your borrowings if you needed to buy a car, home improvements, etc.
• You could possibly avail of the Home Movers feature, if they haven't removed that.

 

[Keninf]

A lot of that is in the press release. The facility as of 31st of August is taken into account if higher than your loan balance. Your rate will still be 1.15 over ECB but there is a provision in T & C for that to go to 1.5 over ECB. Ulster bank will not make that change but no guarantee after that. Homemover I think is still there but not certain.

 

[Monbretia]

Hi all just some questions, surely the amount paid out no matter how much you have in your offset account has to be calculated as if the amount in your account matches what you have left to pay otherwise your not getting compensated for this option going forward fully. The Available facility will also have to be factored in and the option of the once off top up movers mortgage. There also needs to be clarity as to who is buying these mortgages and what interest rate will they be using

The rate is a tracker rate so that can't vary other than ECB changes.

 

[fliball123]

The rate is a tracker rate so that can't vary other than ECB changes.

I might not of been clear. So an example say you had 200k of a mortgage and 100k in the offset they have to calculate your compensation based on if you had 200k in your offset account as they have no way of knowing if at some point in the future you could match those funds so they will have no other choice but to make sure its based on those figures.

 

[Monbretia]

Yeah, the "Pay and Redraw" thing is a new one on me too. @Monbretia you seem to be the resident expert on these matters . So for arguments sake, consider the following scenario; you have an outstanding mortgage balance of 50 K, and you had 10 years left on your term. Your monthly repayment is 500 quid. You have 50K lying around (sure, who doesn't ).

• Could you lodge that 50K to your mortgage account without redeeming the mortgage?
• If your mortgage is fully offset in this way, do you still make monthly repayments against it?
• If there is only 1 account in play here (the actual mortgage account) how do they separate the mortgage balance vs the money that you are using to offset the mortgage? Is it through the available facility?
• How easy/difficult is it to take money out?

Basically what I'm trying to get at is whether it is possible to maintain your current mortgage and pay it off over the remaining term of the mortgage but offsetting it entirely for interest purposes. You might think, "sure just pay it off and be done with it". And that's certainly an option but there are a couple of potential advantages for keeping it going such as;

• You are basically availing of interest free credit for the duration of the term (if you can fully offset it, that is).
• Because you are not paying off your mortgage those savings are there for you to access should you really need them for some other purpose.
• You have access to the Available Facilty which you could use to boost your borrowings if you needed to buy a car, home improvements, etc.
• You could possibly avail of the Home Movers feature, if they haven't removed that.

Too many questions! Head won't work that fast

For starters lodging more than or equal to the balance of a mortgage directly to the mortgage is more than likely going to trigger a redemption of it unlike when you had it in the facility account linked to the mortgage. Now I suppose they might be able or maybe already have done something IT wise to avoid that.

Yes you would still make repayments as normal however obviously the loan would clear quicker as there is little (assuming you had to keep lump sum below mortgage balance to avoid triggering redemption) or no interest.

As for separating them you don't as such but if you were looking at the bank computer screen showing your account it would show mortgage balance and then a credit amount separately which is your lump sum, however I imagine statements etc would show net balance, again unless they change that.

Taking money out is probably similar to drawing down available facility now as in you write a letter in requesting it, lodgments I imagine would have to be bank transfer, not like you can walk in and lodge!

Regarding second part of your queries, I pay no interest and have not done for years as I have more in linked accounts than is owing on mortgage, I still pay the required monthly repayments which basically just come out of the savings and into the mortgage so it's same total overall balance just different breakdown. Of course I could just pay it off but as you say the available facility is handy if I wanted to buy a car for example, although mind you it wouldn't purchase much for me as the AF goes down over the years and what's left on mine wouldn't buy much but for others the amount could be substantial.

The Home Movers bit doesn't apply to me or to any of my friends/relations who have an offset, I would imagine the numbers for whom this might be an issue could be small, they may be retaining it in some small way anyway, it would be easily done and wouldn't need any fancy IT, it would simply mean opening a new mortgage at same rate for same amount and as it would be a standard annuity mortgage from bank point of view should be fairly simple to implement if they need to keep it.

Basically for me it's a great deal, I didn't get letter yet but know the most I will get will be the minimum amount which is still a lot better than nothing! I made great use of that mortgage over the years and am lucky that it is very small now and I could have cleared it years ago but held on to it just in case, luckily!

 

[Layoftheland]

Just got the letter. Think it's good news but haven't read the small print. But good to read that there shouldn't be tax implications, I'd be inclined to put it into the mortgage