Ulster Bank offset mortgages are not being sold to AIB

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Brendan Burgess

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I wrote to Ulster Bank and got this reply

We are currently writing to customers with an Offset mortgage to confirm that their loan is not part of the transaction with AIB or the transaction with PTSB, and that the ‘Choose Move Close’ action does not apply to them at this time. If their Offset mortgage continues to meet their needs, they should not close the current/ savings account linked to their mortgage yet. We will write to them with a further update as soon as possible.

there are a number of FAQs on this on our Customer Support Hub: www.ulsterbank.ie/help-and-support/support-hub.html
 
Dear

We wrote to you in 2021 to tell you that Ulster Bank Ireland DAC is withdrawing from the Irish market. Since then, we’ve signed legally binding agreements to transfer some of our performing tracker mortgages to AIB Group (AIB) and our performing non-tracker mortgages to Permanent TSB (PTSB), subject to receiving regulatory approvals. As an Offset Mortgage customer, we want to update you on the Bank’s current position regarding your Offset Mortgage.

Why are we writing to you?

We want to confirm to you that your Offset Mortgage is not part of the legally binding agreements announced with AIB and PTSB.

You may also have heard about the Bank writing to customers to advise them to choose a new provider and open a new current account with them over the coming months. Please be advised that currently, this does not apply to Offset Mortgage customers with current and/or savings accounts linked to an Offset Mortgage.

As these accounts are linked to your Offset Mortgage, closure of these accounts would result in the loss of the Offset benefit. If the Offset Mortgage continues to meet your needs, you should ensure that any current and/or savings accounts linked to it remain open for now.

As an Offset mortgage customer what do you need to do?

Nothing. You do not need to take any action. Please be assured that your legal and regulatory protections have not changed. We will write to you again, later in 2022, with a further update on your Offset Mortgage and explain what that means for you.
 
Got that letter this morning, sorry I closed some of the offsetting accounts at all as maybe I wouldn't have had to! Kept one savings and the current account, if they end up continuing these on I will be moving my dds etc back again to ub current account!
 
Got that letter too. Pretty late for a lot of people who were probably looking into alternative options. Will be interesting to see what they do next
 
Thanks for that Brendan. I got the letter also - tbh I went straight to the 'what do you need to do' section of the letter and was relieved to read 'nothing' so just tossed it aside. I just assumed that it would go to AIB as a tracker but obv need to read all correspondence from Ulsterbank carefully from now on. I have an old First Active Offset mortgage since 2005.
 
Speaking to someone the other day with contacts UB have no solution yet to the offsets, there are just under 5,000 of them out there, no bank is willing to set up computer programmes to run them so make of that what you will!
 
Monbretia said:
Speaking to someone the other day with contacts UB have no solution yet to the offsets, there are just under 5,000 of them out there, no bank is willing to set up computer programmes to run them so make of that what you will!
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That's very interesting, was wondering how many of those mortgages they had. It's a pretty niche product.
 
Layoftheland said:
That's very interesting, was wondering how many of those mortgages they had. It's a pretty niche product.
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I was really wondering too how many of them were left around the place, I have mine a long time, can't remember exactly how long without looking up documentation as didn't switch to it on launch as we had a staff preferential rate but when that no longer made sense then I switched. Think I will actually draw down all my available facility amount for now anyway!
 
It doesn't sound like it will be top of anyone's list to deal with them so it's probably a waiting game. Do you think it's now or never to draw down any facility?
 
Monbretia said:
Speaking to someone the other day with contacts UB have no solution yet to the offsets, there are just under 5,000 of them out there, no bank is willing to set up computer programmes to run them so make of that what you will!
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That is interesting alright. I'd love to know what the outstanding amount on them is, probably less than 500mil. Sounds like they need to ensure that if they did find a buyer for them they need to maintain continuity of product features (offsetting, facilitys, etc).

If no other party wants the hassle of that (and that is certainly understandable, IT projects are expensive, time consuming and painful) what are UBs options here? Maintain some sort of entity in this market purely to manage these mortgages?

Definitely a waiting game and I certainly wouldn't be in any hurry to look at moving your mortgage to another provider, if you had one of these mortgages that is.
 
Brendan Burgess said:
Why would you?

You have a contract which they cannot change without your agreement?

Am I missing something on how these work?

Brendan
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Just in case Brendan! In theory yes you can draw it anytime but the amount does keep going down and mine is fairly low at this stage, it might be easier draw it now when things are still running relatively normally. I simply wouldn't trust them not to find a way out of it!

Apart from that I seriously doubt these mortgages will continue to exist once UB closes, whatever solution they come up with before that would I feel include getting rid of the offset concept altogether and switching these mortgages to ordinary annuity type. I know nothing has been announced but I don't see any other way out of it for them.
 
Monbretia said:
I know nothing has been announced but I don't see any other way out of it for them.
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Monbretia

They can't just argue that these contracts are no longer convenient for them and change the rules.

Am I right in saying you have a mortgage of say €200k and a deposit of €120k and they are charging you interest on the net amount of €80k?

What are you proposing to do in case they break the contract? withdraw the deposit of €120k and pay interest on the €200k?

Brendan
 
That is the way they work, you pay interest on outstanding net balance. I don't expect them to change anything to do with that aspect but drawing down additional funds might not be as secure a rule.

They will need to convince people to switch from offset to annuity.
 
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Are you suggesting that they might try to freeze your savings and say that you have a mortgage of €80k and that you can't increase it?

Seems like an unlikely breach of contract.

They could sell the mortgages net to say AIB and require AIB to allow you to increase the mortgage at any time.

Say you have a mortgage with AIB of €80k.
You can increase it to €200k at any time.

Brendan
 
No, I don't think that is likely or possible, they can't just automatically transfer the savings account balance to the mortgage to reduce it.

Even if they did as your suggestion, transfer the net 80k to AIB and then I immediately drew down the extra to bring it up to 200k as per original it wouldn't solve the problem as I still would want the offsetting of the drawn down 120k off the overall new balance of 200k so if AIB have to sort that out and provide a system to do it they may as well just transfer the mortgage/offset as it is.

I just don't think the mortgage type will exist after closure.
 
aoraki said:
If no other party wants the hassle of that (and that is certainly understandable, IT projects are expensive, time consuming and painful) what are UBs options here? Maintain some sort of entity in this market purely to manage these mortgages?
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It's inevitable both KBC and Ulster will have to maintain some kind of entity for a very long time to deal with all sorts of issues.

For example Danske left the Irish mortgage market in (I think) 2016 but their Dublin office is still carrying out a tracker review. I wrote to them last year and got a reply back after two weeks.

So it's not at all implausible that Ulster retains a wind-down entity to deal with these offset mortgages.
 
I’m thinking that this is probably the likeliest outcome. I think some of the suggestions above will constitute breaches of contract by the bank. Dankse ran into issues when they tried to do similar things and had to reverse their course of action. Any attempt by UB to dispose of these mortgages is likely to incur a big loss for them as I don’t think any other bank will want to deal with the hassle of them unless they are being sold on at a big enough discount to make it worth their while.

We’ll see how it plays out.
 
Monbretia said:
it wouldn't solve the problem as I still would want the offsetting of the drawn down 120k off the overall new balance of 200k
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I don't understand

If you have a mortgage of €200k with a savings balance of €120k which you can access any time, it is the same to you as a mortgage of € €80k which you can increase to €200k at any time?

Other than some psychological assurance that you have €120k cash in a savings account, it makes no difference.

I presume it's easier for AIB to give you an interest only mortgage of €80k and a credit line of €120k than to set up a system whereby you have two accounts which offset.

Brendan
 
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