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This year in particular it is quite likely that many farming families will consider switching their mortgage with KBC Bank and Ulster Bank both due to leave the Irish market.
Report
A recent report from the Banking and Payments Federation of Ireland (BPFI), stated a total of 4,959 mortgages were approved in November 2021, of which 53.7% were for first-time buyers (FTB). Movers accounted for 23.6%.
Re-mortgaging or mortgage-switching activity rose by 20.8% and 25.8% in volume and value terms respectively in comparison with November 2020. Chief executive of BPFI Brian Hayes said: “Mortgage approvals activity remains close to historically high levels. On an annual basis, more than 53,000 mortgages worth more than €13.4bn were approved in the 12 months ending November 2021.”
Dear Money Mentor,
We are dairy farmers in Limerick. We took out a mortgage of €250,000 on our home about seven years ago with Ulster Bank. I know Ulster Bank are exiting the market soon and our mortgage will transfer to Permanent TSB (PTSB) unless we switch it ourselves.
We are wondering should we switch to another lender now, or just wait until the Ulster Bank’s deal with PTSB finalises. Our farming accounts are with another bank, so at least we don’t need to be concerned about those.
Also, my wife has a personal credit card with Ulster Bank. Am I correct in assuming they will just close the account and she can apply for a new credit card with another bank?
Any advice would be appreciated.
Michael
Margaret writes
Hi Michael,
You are correct, PTSB is due to acquire about €6.8bn of mortgages and business loans from Ulster Bank when the deal finalises. This includes only performing loans – ie, loans with no repayment issues.
Ulster Bank holds about 15% of the Irish mortgage market so there will be a lot of customers who will end up with their mortgage with PTSB, unless they choose to switch to another lender themselves.
Ulster Bank will contact all of its customers before any of the accounts are moved, as legally customers must be given two months’ notice in these cases. All terms and conditions of these loans and mortgages will remain the same, which means your monthly repayments and interest rate will not change, even if your loan is sold to PTSB, unless you have a fixed rate that expires.
Under the Central Bank rules, all mortgage providers need to make it easier for customers to switch, if they so wish.
One thing to note is this loan book sale does not include tracker mortgages or non-performing mortgages (in arrears). Ulster Bank will need to find another buyer for these before it leaves the Irish market.
I am assuming you do not have a tracker mortgage as tracker rates would not have been available in the market in 2015. If you do have a tracker mortgage I would strongly advise you not to switch but allow the mortgage to transfer as part of the loan sale, otherwise you would lose your tracker rate – the best rate ever for a mortgage.
If you hold a performing mortgage (and repayments are up-to-date) with Ulster Bank, you need to compare the interest rate you are paying with what is available in the market today, before deciding to switch.
In switching, you will incur certain costs such as legal fees (€1,000 on average), and the cost of an up-to-date valuation (€150 on average). Some mortgage providers offer “switching cashback” which will help cover these costs. You can also avail of better interest rates depending on the amount of the loan in comparison to the value of your home (LTV). The lower the LTV, the lower the interest rate. Fixed-rate loans are usually cheaper than a variable rate loan.
You will already hold a mortgage protection policy, but if you decide to switch, this does not need to be cancelled, it can be transferred to the new lender. It should be on a decreasing scale in line with the mortgage balance.
Interest rate
The interest rate is the single most important consideration when switching, it can save you thousands over the term of the mortgage. You could ask a broker to find the best rate in the market for your individual mortgage, or check websites like bonkers.ie or switcher.ie yourself. Last year, ICS Mortgages, EBS, Finance Ireland and Avant Money all reduced their rates. Avant Money, Finance Ireland and ICS Mortgages quote fixed rates of 1.95% for switchers who have a lot of equity in their homes. If you qualify for a “green mortgage” most banks offer a reduction in the interest rate. Green mortgages are applicable for more energy-efficient homes with high BER (A1 to B3). AIB offers a 2.1% interest rate for green mortgages while Bank of Ireland offers a discount of 0.3% on all fixed rates for green mortgages.
Credit card
Ulster Bank has not yet announced what it intends to do with its credit card business. If your wife has an outstanding balance on her card, she will need to repay this in full, before closing the account herself.
The interest rate on a credit card is very expensive so it is always a good idea to clear it monthly, to avoid this. By switching to a new credit card provider, she could avail of a 0% interest for a period of time, which is very helpful in clearing an outstanding balance quickly. An Post Money currently offers a credit card with 0% interest for 12 months for balance transfers.
It is always a good idea to get some professional advice before switching.
All the best,
Margaret
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