Ulster Bank 10% overpayment option?

Hi

We are on an UB fixed rate of 2.5% through to Sept 2023. Outstanding balance is circa 470K.

We may be in a position to over-pay in the next year or so. How does UB calculate the 10% overpayment? Is it 10% of the balance at the time or is it 10% of the original balance when the mortgage was set up (it was 550K at drawdown).

Thanks

And another question - do they consider the “per year” to be rolling 12 months or a calendar year? In other words do I have 2 Years and 4 months worth of repayment available or is it 3 years (2021, 22, 23).

Thanks again!

It is 10% of the outstanding amount once per calendar year.
I Paid back that extra last year in June and again this year in January.
Next time for me will be Jan 2022, my fixed period then ends in March 2022.

I hope to pay down another chunk of the mortgage then in April 2022 and then fix again immediately, hoping they still have another 3-5 year fixed on offer around the 2.2% mark then.

if it is clear that this won’t be possible, I will move to Avant as soon as I know. Break fee should be small enough hopefully. I really like the 10% overpayment option, hence I am not already rushing to switch.

Hi newirishman,

So if you owe €520,000 on 10 May 2021 and haven’t made any overpayments during 2021, you can repay €52,000 on 10 May 2021, correct?

Gordon

Gordon Gekko said:

Hi newirishman,

So if you owe €520,000 on 10 May 2021 and haven’t made any overpayments during 2021, you can repay €52,000 on 10 May 2021, correct?

Gordon

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Short answer, yes

If you take out a mortgage on the 10th of €520k you can pay back €52k extra in the first year without triggering a break free calculation.

If it's an existing mortgage the upper limit would be a little more than €52k, as the outstanding amount on the mortgage would have been more than €520k on Jan 1.

This is my understanding too for UB overpayments.

I'm a bit unclear on whether a refix gives you another opportunity.

E.g. last week, you overpayed 10p.c. (of the value of the mortgage on jan-01). This week you re-fixed. I guess next week you can then pay ten percent of the balance (as of date of fixing).

Interesting, so this says in fact you can pay down each 10% over n+1 years if you fix for n (since unless you do it Jan 1 you will always have a part-mortgage in two years)

I don't see your logic. But I think I understand what you are trying to say. Note that Once you are out of the fix , and/or before you refix, you can pay as much as you like.

You can pay ten percent a year while fixed.

You can pay as much as you like when moving from over from one fix to another.

You can potentially pay 20% in a year where you refix, while inside two different fixed agreements. But I have not confirmed this final point with UB. It's a guess based in how I expect the contract/terms to be worded.

So, my logic is as follows. I took a 5-year fix in Sept 2018, through to Sept 2023.

I *could* have paid off 10% in
2018
2019
2020
2021
2022
2023
so 6 years in total (i.e. n+1 from the 5 year fix)

Now, in my case I didn’t may any overpayment as I didn’t have the funds to do it until now. But my point still stands - if they do it in calendar years vs. rolling 12 months on the anniversary, you get an extra “year” to pay down a further 10%. Makes their repayment offer even more attractive.

Taking another fix might extend it further (you get a double chance in the year you re-fix, maybe?)

Yes, I originally thought it was 12 months from fixation but when I checked they said calendar year. So 10% of outstanding balance could be paid:
Sept-dec 2018
2019
2020
2021
2022
Jan- sept 2023 (or whenever the fix expires).

Of course it's 10% of an ever decreasing balance but it does appear to be the most flexible option on the market at present.

I followed this up today with them - the only slight difference to the above is that you have an allowance of 10% overpayment per year - so if you re-fix mid-year onto a new rate, you can’t get a 20% opportunity, it’s 10% per customer on a fix rate per calendar year.

But surely if my fixed rate expires today and I paid 10% in January, I just overpay as much as I want tomorrow and then fix again on Wednesday?

I would think these are different fixed rate products so the calendar year overpayment effectively resets when the new fix starts.

I wouldn't say I can over pay by 20% but I would have thought I could over pay by 10% of old fix in first part of the year and 10% of new fix in the second part of the year. What I do before I fix for the second time shouldn't impact the 10% capacity to overpay in the subsequent fixed mortgage.

skrooge said:

I would think these are different fixed rate products so the calendar year overpayment effectively resets when the new fix starts.

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That's what I would have thought also, as the new fix is a separate agreement. It's a while since I read one of their contracts though to see where exactly the 10% is.

It just seems very messy to penalise someone like this. Then again I do have a 4.5 year 4-year fixed-rate mortgage from them so they do have form when it comes to overcomplicating things.

I would imagine the Ulster Bank staff got confused if 20% got mentioned. It's tricky enough trying to explain it here.

In Ulster's defence they probably don't deal with many customers who refix in the same year, want to overpay by close to 20% and don't avail of a variable rate option to do this at some point.

While it's a great option I don't imagine the mortgaged masses care that much about overpaying or as some might see it giving the banks more money

my understanding, and what i have been doing without penalty is that you can over pay up to 10% of the balance outstanding at 1 Jan of the year in qn, so if my mortgage stood at 500k on 1 Jan 2021 i can make an overpayment of up to 50k in that year.

skrooge said:

It just seems very messy to penalise someone like this. Then again I do have a 4.5 year 4-year fixed-rate mortgage from them so they do have form when it comes to overcomplicating things.

I would imagine the Ulster Bank staff got confused if 20% got mentioned. It's tricky enough trying to explain it here.

In Ulster's defence they probably don't deal with many customers who refix in the same year, want to overpay by close to 20% and don't avail of a variable rate option to do this at some point.

While it's a great option I don't imagine the mortgaged masses care that much about overpaying or as some might see it giving the banks more money

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I don‘t understand how this is in any way penalising anyone. It is a great offer I think. it is unusual that you can pay down any serious amount over and above the monthly repayment from a fixed mortgage contract.
Also, I disagree with your comment reg 4.5y vs 4y: they make it very clear that you fix until a certain date that is potentially a bit longer than what the marketing headline says.
Unless some other mortgage advisors (best example: PTSB), UB was always very clear in all mortgage dealings, since I switched to them 4 or so years ago.

newirishman said:

I don‘t understand how this is in any way penalising anyone.

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I agree Ulster are the most flexible. However, if they implement it as you say - which I don't believe that they do - I would have less flexibility than a corresponding new customer.

It would be the same as banks offering different rates for new and existing customers. For example:

Person A existing customer. Outstanding mortgage €555,555 as of Jan 1. Their fix expires on Jan 3rd. Ahead of that they overpay by 10% on the 2nd. They refix their outstanding mortgage (500k) on the 3rd.

Person B - new customer, takes out a mortgage for €500k on the 3rs. Same T&C's, fixed duration, term etc.

According to your interpretation person A has no flexibility to overpay while person B does. From a banks perspective there are no additional costs associated with A over B so I would think A has been unduly penalised. For the record I don't believe this is the case. I believe all customers would be treated as B but if I'm wrong I'm wrong

As for the 4.5 year fixed rate, or equivalent, I have no issue with it but I would still consider it messy from a banks perspective trying to hedge interest-rate risk. Ulster fix the maturity date so the term reduces day to day. I would have thought a 4 year swap rate rate is a lot more common.

I don't know what your loan to value is but if it under 80% then it may make sense to look into switching to Finance Ireland given they charge, for 3 year fixed rate products, just 2.4%.

2.35% is the 3 yr fixed rate if the loan to value is under 60%.

These rates are not huge drops from what you are currently on but if you have enough surplus funds and want to make substantial overpayments then Finance Ireland will allow you to make an annual penalty-free lump sum of up to 20% of the outstanding principal - for each year of the fixed term. I'm not sure if that means you could select a 5 yr fixed rate product & clear the whole mortgage within that timeframe but 20% is

More & more people are getting out of fixed term products without charge so it may be worth a phone call to UB to see if you could be one of them.



justin.griffith@mortgagebrokers.ie