UB charging 5.4% on home loan. Can I do anything about it?

Posting on behalf of my friends. I've seen great advice here and they are in need of same. They bought their detached house in 2008 for €365,000, with loan part of it being €332,000 for 35 years with Ulster bank. The amount of loan outstanding to day is €309,000 and a house in the neighbouring estate sold recently for €275,000.
Their interest rate is very high at 5.45%. On annual mortgage statement the "Initial/Former Product Name" is "SVR +1.15%". Is there a way of changing that rate to just a normal SVR? Is this even legal...
Is there any way another mortgage provider would take them on? They both in permanent employments, the mortgage payments made regularly.
Any advice gratefully received.

Sorry, have no advice to give, but wow! -- that is a savage rate. They have handed over nearly €140k so far to knock €30k off the principal, and by the end of the term will have paid €745k by my reckoning. Hopefully someone else can offer advice.

Hi M

All of Ulster Bank's mortgage rates are quoted as SVR + or SVR - a margin.

When they took out the loan, there must have been some feature of it which justified such a high margin over SVR. Maybe it was a 100% loan? I don't remember them having such a large margin.

Yes, it's perfectly legal to set the rate like that. Not only is it legal, it's a very fair way of doing it, as they pass on rate cuts to existing customers, which some other lenders don't.

The problem is that the SVR at 4.3% is very high.

Your friend will not be able to switch to another lender until their LTV is below 80%, or possibly 90%.

They should speak to Ulster Bank and ask for a reduction. They will probably be refused, but there is no harm in asking.

Brendan

Thank you, dub_nerd. The rate is extremely high, particularly because of this 1.15% added to their SVR for some reason. They would be happy to go on at least 4.5%, maybe.. Would Ulster Bank agree on it?They're considering increasing a monthly payment by a few hundreds to get out of NE as early as they can.
They took out a mortgage initially with the First Active plc which was merged into Ulster Bank in 2009. On the original loan offer the details are: "amount of credit advanced: €332,000" ; "Amount of each instalment: €1,915"; "Total amount repayable : €850,600"; "Cost of this credit: €518,560"; "APR: 6.4%"

Thanks for the advice, Brendan, much appreciated. It was 90% mortgage, they paid €33,000 deposit and took €332,000 loan.
I will tell her to set up an appointment with the mortgage advisor,

Was there something unusual about the original loan? Buy to let/guarantors/consolidation? Anything at all different, I presume it was never a tracker?

Is it an offset mortgage? That was where the borrower could overpay the mortgage and then draw back the overpayment. They charged more for them.

Brendan

Hello, thanks for the answers so far. This is my mortgage so I'd like to clarify.

- it was variable rate mortgage from the start (no fixed rate period)
- when we borrowed ECB rates were at their highest level
- we went with FA offer because we could borrow the maximum amount in relation to income. At that time we had only one income in the family and while other banks with lower
variable rates were offering up to 4 annual incomes, FA gave us 5.5 which we needed to buy the house we wanted (as we were realizing that we'd be getting into
negative equity we wanted to buy a house which would satisfy us for very long term).
- since then ECB was cutting rates, but Ulster Bank was not passing all the cuts to existing customers, hence the margin over SVR

Hope this makes it clearer.

oleksiy said:

FA gave us 5.5 which we needed to buy the house we wanted

Click to expand...

Hi

It was and is a very risky loan. 5.5 times joint incomes? 90% LTV?

The margin may well be justified.

Having said that, the SVR is not.

You could argue that as you have never missed a payment, the loan should be repriced.

Brendan

Thanks for all the advices given here.

It's unusual, when the multiple was so high usually the only way of getting that much was to go with a 5 yr fixed as there was no stress testing on the 5 yr fixed. But if you say it was variable from the start then that explanation doesn't work, odd that it wouldn't have been a tracker at the time as they were good value then.

Offset was always 1.15% over ECB, a little extra to LTV trackers but not overly expensive. It's odd that you %+SVR is also 1.15

Did you deal directly with the bank or through a broker?

We dealt with mortgage broker. I believe that all tracker products were withdrawn from the market by that time (November 2008).

Now when looking at loan the offer letter I realize that perhaps rate in the offer was already higher than FA's current SVR. The rate in offer letter was 6.25%.

Later we received a letter from the bank advising that "with effect from 17/11/2008 the Bank's Standard Variable Mortgage rate will decrease by -0.50% to 5.10%.
This has implications so far as the recent Offer of Loan which we made to you is concerned. As you have chosen a product linked to the Bank's variable rate,
the interest rate shown on the existing offer document will decrease by -0.50% from 17/11/2008. You revised monthly repayment details will be advised to you at the
time of completion".

So perhaps the rate in the loan offer was SVR(5.60%) + 0.65%. When we received this letter about rate reduction we assumed that our actual rate is going to be
5.75% (6.25% - 0.50%).

Then some trickery happened. I don't know if it's our fault, broker's or solicitor's. Perhaps we had to double check with broker to confirm the rate but we did not.
When the first repayment was made I noticed that we were charged at 6.25%. I called the bank to check why and they said that the mortgage was drawn down
at 6.25%.

Later we received another letter from the bank, confirming that repayments are based on the rate stated in our letter of offer (6.25%).

"Please ignore earlier correspondence sent to you in relation to your interest rate, as this was sent in error. We apologies for this error and for any confusion
this may have caused".

So I guess the initial margin of 0.65% plus reduction of 0.50% which was not passed give this + 1.15%

Does the original loan offer show SVR + a margin? If not why does the present statement show a rate plus a margin, if you look at all the statments since original loan was taken out when did the product/rate change to showing the margin bit or was it there since day one. I just don't recall seeing SVRs plus any margin on FA loans, on trackers yes but not on standard SVR, it was just a straight rate.

yup, you need to check the loan offer and check to see if it says svr + margin, or does it say Rate%.

current svr is 4.3%

you could ring the telephony unit and ask for a fixed rate options sheet.
they will then hopefully send a fixed rate sheet to you with all the rates currently open to you.
asking for this sheet, will not change anything.

I will reply on Olexiy's behalf whilst he is busy:

Thanks Montbretia for clarifying this. We are now quite suspicious there was some mistake made during the merge from FA to UB, can someone please take a look?
The original Loan Offer has the following details:
Loan Type: TPI FLexible Variable > 80%
Capital and Interest
Interest Rate: 6.25%
Interest Type: Variable
Monthly Loan Repayment *: €1,915.84
* based on a calculation using the current First Active plc variable rate


Thanks rameire, hopefully it's possible to move on to 4.3% now.

Hello, I've uploaded info from the first and second page of the loan[broken link removed]
offer. I cannot see margin stated explicitly in the loan offer.
The margin 1.15% appeared on the first year statement.

Just to clarify the last image taken is of the Annual Mortgage Statement sent on 02/12/2009 by Ulster bank. The first two images are the original loan offer from first active.

based on the pic you have provided and the account being drawn in 2008, and the mortgage being sub account no 1, the mortgage number should start with 40******.
the system that it was drawn down on if above is correct is still active in Ulster Bank, your mortgage is still on the system that it originated on.
the SVR changed quite dramatically in 2008 and 2009.
Oct 08 it was 6.1%
Nov 08 it was 5.6%
Dec 08 it was 5.1%
Jan 09 it was 4.6%
Feb 09 it was 4.1%
Apr 09 it was 3.85%

so your mortgage drew on 2/12/08 when the svr was 5.1% which gives the starting rate at 6.25%
and the rate when the statement was created was svr of 3.85% + 1.15% = 5% as shown on the statement.

check the special conditions page of the loan offer to see if there is a margin shown there.

So if their initial loan offer said 6.25% variable when loan offered was issued by FA on 21/10/08 and the drawdown was 2/12/08 when the variable had dropped to 5.1% should they not have had the benefit of the dropping rate as it was a variable rate offer, this would have been the norm and the loan should have drawn down at the prevailing variable rate at date of drawdown. If rate had risen they would have been charged the new higher rate.

Instead a margin of 1.15% seems to have been added to bring the loan back up again to what the loan offer said even though variable rates had dropped as per rameire's list. If there was any margin over variable and that is not something I would normally have seen on a FA loan then it would have been .15% surely which is the difference between the 6.25% rate of the loan offer on 21/10/08 and the rate rameire quotes for Oct 08 of 6.1%. But as rates were changing rapidly at that time was there actually a 6.25% standard variable across FA/UB in late Oct of 2008?

When in Oct 08 did the 6.1% commence?