Key Post Should an existing Ulster Bank customer do anything before their mortgage is sold to permanent tsb?

Brendan Burgess

Founder
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44,828
Ulster Bank is nearly the cheapest lender at the moment while permanent tsb is the most expensive. Anyone who moves to Ulster Bank who is not on a tracker will find themselves paying a lot more when they move to permanent tsb.

If you have a cheap tracker with Ulster Bank, you don't need to do anything.

permanent tsb will not be able to increase the margin.


If you have an LTV of less than 60%, you should switch to Avant now and fix for 7 years

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The lowest rate with permanent tsb is a full 1% point dearer than Avant. So you should switch.

As mortgage rates will probably rise due to the fall in competition, then switching to Avant and fixing for 7 years seems appropriate.

"My mortgage balance is only €100k, is it worth switching?"

You can fix for 5 years with Ulster at 2.35% compared to 1.95% for 7 years with Avant. That is a saving of €400 a year for, say, 7 years or €2,800. It costs about €1,500 to switch. But you are probably going to face the cost of switching from permanent tsb anyway when your fixed rate is up. So, on balance, I would switch now and fix for 7 years.

"Avant is cheaper now, but how do you know they will still be good value when the fixed rate is up in 7 years?"
There is no way of being sure. But permanent tsb has a long history of keeping its mortgage rates very high for existing customers and getting new business through gimmicks like cashback. So it's very likely that Avant will be cheaper in 7 years.

But we know that they will be cheaper for the next 7 years.

If you have a loan to value of between 60% and 80% it's less clear cut

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You can fix with Ulster now for 5 years at 2.45%. You could switch to Avant for 2.2%, a saving of 0.25% a year or 1.25% over 5 years.

On a €200k mortgage, that is €2,500. With legal fees of €1,500 up front, it might not be worth the hassle.

The only thing is that if you fix with Ulster Bank now, it is very likely that you will have to switch from permanent tsb when the fixed rate is up as they have a long history of charging high rates. No one knows, but I would guess that Avant will still be much cheaper than permanent tsb in 5 years.

If you have an LTV in excess of 80%, then fix with Ulster Bank now for 5 years

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That is all you can do. If you don't fix now, you will be charged a much higher rate by permanent tsb.
 

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Brendan Burgess

Founder
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I can't switch because I have two years to go in my fixed rate with Ulster Bank

You can break out of any fixed rate early. Fixed rate breakage fees are often much lower than people expect. So ask Ulster Bank what the break fee is.

If the break fee is very low or zero, then break now. Don't wait until you have been approved by Avant as the break fee is very volatile and could be a lot higher next week.

Don't forget that Ulster Bank allows customers to pay 10% off the balance each year without any break fee. So if there is a fee, try to pay off 10% first.

I don't want to fix as I want to overpay my mortgage or pay lump sums off it?

This is a real dilemma with all lenders. The best value is in fixed rates.

It's probably worth fixing now anyway. It's likely that the break fees for overpayment will be quite low.
 
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Protocol

Registered User
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3,476
This has already been posted earlier, in a thread about a possible UB internal switch.

UB mortgage, I think 24yr term
Date you fixed: 10-Dec-2018, start of mortgage
Period for which you fixed: 4 years
Fixed rate: 2.60%
Fixed until 31.03.2023
Note that the fixed period is actually more like 4y 4m. So I am roughly half way through the fixed rate period.

Amount of mortgage balance outstanding: €150k, December 2020
Letters rec'd from UB, Jan 2021, in response to my query about breakage fees.
Break fee = 1,944.28, valid until 14.01.2021.
Rate sheet: 2yr fixed 2.2% until 31.03.2023 is 39 less pm for same term, so a saving of 26 months * 39 = 1,014


Lump-sum 10% overpayments already made: 2019, 2020, 2021
Balance now = 134k, LTV is well below 50%, LTI is less than 2x gross income


Possible switch to Avant at 1.95%?

Break fee = nearly 2,000
Sol fee =? I suspect I could get it done for 1,000, outside Dublin

That 3,000 fee is a lot to offset....................
 

Brendan Burgess

Founder
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44,828
1) You must look at the interest rate and not the repayments. Repayments include capital and so do not reflect the full savings.

2) Break fees change all the time and will reduce as the remaining fixed rate term reduces. You seem to have reduced the balance since then as well. So it's quite likely to be less than the €2k quoted in January.

Option 1 - Break and refix with Ulster Bank

Difference in rate 0.4%

Savings : 23 months/12 @ 0.4% @ €134k = €1,027

If the break fee is higher than €1,000, it is not worth paying to break and refix within Ulster.

If the break fee is lower than €1,000, it's well worth breaking and fixing for a longer period so that you will be guaranteed that rate for the fixed term.

Now let's look at Option 2.

Option 2 - Break and switch to Avant at 1.95% for 7 years

It is fairly reasonable to assume that when your fixed rate ends in 2023, the rate charged by permanent tsb will be at least 2.6%.

Annual saving : 0.65% (2.6% -1.95%) x 7 years = 4.55%

€134k@ 4.55% = €6,000 (It will be a bit less due to amortisation but the 2.6% is only an estimate as well, so it's close enough for our purposes.)

This would comfortably cover the break fee and the solicitor’s fees, so it’s clear that you should break and switch.

Another way of looking at it
Annual saving is about €900 (0.65% of €134k)

So you will cover the legal costs of switching in one year.

It will take another one or two years to cover the break fee.

After that, you will be with the cheapest lender in the market.

Brendan
 
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renter45

Registered User
Messages
109
I'm out of 2 yr fixed in June, LTV 65%, just over €250k left, have now fixed for another 5 years 2.2% with UB. Best + easiest option for me.
 

SPC100

Registered User
Messages
935
I don't want to fix as I want to overpay my mortgage or pay lump sums off it?

This is a real dilemma with all lenders. The best value is in fixed rates.

It's probably worth fixing now anyway. It's likely that the break fees for overpayment will be quite low.
UB allow 10% of balance at start of year to be repaid within that calendar year.

I thought I saw something on the avant thread implying that Avant were looking at allowing some similar significant overpayment.
 

Brendan Burgess

Founder
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44,828
Hi SPC

I have updated the post accordingly.

I have been told that Avant is looking at this. But, in any event, people fixing today, are unlikely to face a large break fee because of the way break fees are calculated.

Brendan
 

John 1982

Registered User
Messages
6
I'm out of 2 yr fixed in June, LTV 65%, just over €250k left, have now fixed for another 5 years 2.2% with UB. Best + easiest option for me.
We want to the same thing. Fix for 5 yrs and are currently on a 2 yr fixed until September. I am just wondering should we fix now or just wait until September?
 

Brendan Burgess

Founder
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44,828
Hi John
Ask for a break fee and then decide.

The ptsb takeover is some time away. They have not notified the Competition Authority yet.

Brendan
 

NaDagda

Registered User
Messages
5
UB mortgage: 30 years
Date you fixed: Jan 2020 - Start of mortgage
Period for which you fixed: 5 years
Fixed rate: 2.65%
Fixed until Jan 2025
Mortgage: 270k
Current LTV: 73%
Mortgage: 1090e pm
Currently paying: 1690e (overpaying 55%)

Hello Brendan or anyone!
Looking for advice on how I should proceed at the moment with the UB changes. I can't see any other bank letting me over pay as much as I am doing (pensions maxed). Unsure how long we will stay in this home, potentially looking to move out West within 5-7 years.

What advice would you give in terms of:

Am I overpaying too much if planning to sell in 5-7 years?
Should I switch to another bank now or wait until close to the end of term?

Thanks!
 

Brendan Burgess

Founder
Messages
44,828
What break fee have you been quoted?

You can fix for 5 years at 2.2%
That would save you .45% of €270k per year or €1,200 in the first year.


Or you could fix for 2 years at 2.25% .
 

Brendan Burgess

Founder
Messages
44,828
If your income is fairly reliable and predictable so that you know that you can afford to pay €1,700 a month, then cut the term of your mortgage so that the scheduled payments are higher.

The downside is that you won't be able to "underpay your mortgage" but you will have more scope to overpay.
 

Brendan Burgess

Founder
Messages
44,828
Am I overpaying too much if planning to sell in 5-7 years?

If you expect to be in a position to buy your new house and retain your old house, then it might make sense to build up the deposit of 20% needed to buy the new house. By "retaining your old house" I don't mean retaining it forever. It's just much easier to buy a new house, move in and then sell your old house.

If you have to sell you existing house to buy a new house, then paying down the mortgage as much as possible is the best financial plan.

As your plans are uncertain, I think you are right to pay your mortgage down as much as possible. If your plans harden, then you can change your payment plan accordingly.

Brendan
 

NaDagda

Registered User
Messages
5
If you expect to be in a position to buy your new house and retain your old house, then it might make sense to build up the deposit of 20% needed to buy the new house. By "retaining your old house" I don't mean retaining it forever. It's just much easier to buy a new house, move in and then sell your old house.

If you have to sell you existing house to buy a new house, then paying down the mortgage as much as possible is the best financial plan.

As your plans are uncertain, I think you are right to pay your mortgage down as much as possible. If your plans harden, then you can change your payment plan accordingly.

Brendan
The plan would most likely be the buy/sell dance but I've not thought that far ahead yet to be honest! Good to know though that paying more now is the right move, difficult to balance when you hear about inflation, cheapest money you'll ever get etc.


If your income is fairly reliable and predictable so that you know that you can afford to pay €1,700 a month, then cut the term of your mortgage so that the scheduled payments are higher.

The downside is that you won't be able to "underpay your mortgage" but you will have more scope to overpay.
Commission based so I wouldn't be too confident in cutting the term of the mortgage. In addition, I like the flexibility of being able to revert back to the lower payments if needed (eg. should my partner and I both lose our jobs at the same time.

What break fee have you been quoted?

You can fix for 5 years at 2.2%
That would save you .45% of €270k per year or €1,200 in the first year.


Or you could fix for 2 years at 2.25% .

I've not looked into breaking yet as I'm only around 17 months into the mortgage. If I fixed elsewhere where at 2.2% (where would this be?) would I still be able to overpay by the amount I'm overpaying?

Thanks for the advice so far!
 

Brendan Burgess

Founder
Messages
44,828
Commission based so I wouldn't be too confident in cutting the term of the mortgage. In addition, I like the flexibility of being able to revert back to the lower payments if needed (eg. should my partner and I both lose our jobs at the same time.

OK

That is terribly important. You can't afford to go into arrears as you will not be able to move West.

That must be your priority. So keep your scheduled repayments low.

Brendan
 

Brendan Burgess

Founder
Messages
44,828
UB has the same rates for existing and new customers.

There may be a break fee - you need to check that and see if the savings justify the break fee

Brendan
 

dgray_ie

Registered User
Messages
30
Original Mortgage for Self-build taken with BOI taken out 2009 €300,000 Variable Rate
Switched to UB mortgage in Nov 2015 (Thanks to Brendan)
Variable rate: 3.00% (discounted loyalty rate I believe)
Mortgage Balance: €159,081.05
Current LTV: 27%
Mortgage: €1356.19 pm
Remaining Term: 11yrs & 6 mths
Currently paying: €1356.19 (overpaying 0%)

Hello Brendan or anyone!

I looked into the possibility of switching to Avant (3, 5 or 7 yr fixed rate <60% LTV @ 1.95%) however they are not covering my area at the moment in the NW.

UB currently offering, 2.2% for 2 yr fixed , 2.35% for 4 yr fixed and 2.8% for 7 yr & 10 yr fixed.

UB advised if I was to switch to fixed at end of term it would revert to SVR which currently is 3.5%. Is there any talk of Avant taking on loans across the country if that was the case would I better to sit tight on current variable rate?

Thanks!
 
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