Ulster Bank offset mortgages are not being sold to AIB

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Keninf said:
but could this be why Ulster Bank are being slow to act on these mortgages
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No. They're a legal and operational nightmare, and UB are trying to work out how much they'll have to pay someone to take them off their hands so they can hand back their banking licence and get their capital out of the country.
 
It would be nice of them to at least provide an update as to what's happening. Their last communication said they would get back to us by the middle of 2023, and we're well past that.
 
cremeegg said:
Any chance Thay would do a deal. I have €70k outstanding at ECB +0.75%

Do you think they would take €50k ?
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You're directing that question at the wrong people I'm afraid! Only Ulster Bank can answer that question for you
 
RichInSpirit said:
Closure. If they are genuinely looking to offload them and nobody else wants them, why not do deals on a case by case basis and reduce the number of them.
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Because it only takes one customer to not play ball and they're left still needing to hold the licence, capital and meeting all the other regulatory requirements.

Nothing is agreed until everything is agreed.
 
What is the size of this loan book. 5000 loans I believe so could it be 500mil. Minimum 4% return at the minute or 20mil. Could they now be worth the hassle for another bank?
 
Keninf said:
Could they now be worth the hassle for another bank?
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Do you know how the capital requirements for an offset mortgage work? Or realise a number of these are earning zero interest because there is a full offsetting credit against them? Plus, they can get 4% just putting excess cash on deposit wuth central bank.
 
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I don't know anything about capital requirements. That's why I am asking the question. But if I owe 100k and have 100k offset them I'm not paying any interest. Not getting any other return either. But what is stopping the bank, or new bank from earning the 4% on my 100k?
 
Keninf said:
But if I owe 100k and have 100k offset them I'm not paying any interest. Not getting any other return either. But what is stopping the bank, or new bank from earning the 4% on my 100k?
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You mean on your Zero? And bank taking it on needs to take both.
 
It's far too late for them to do a deal with customers, they should have attempted that very early on when they still had branches and staff who knew the product and the customers. Yes all customers would have to agree but everyone has a price and I'd imagine most if offered a good fixed rate and a bit of a sweetener could be persuaded.

There was a change to the operating of that mortgage when it was switched from Current Account Mortgage (CAM) to Offset and every customer had to agree to it, one of the repayment options was removed, branches had to contact customers and get sign off from them, there was a small incentive to sign up but they all must have anyway as the change went ahead. If UB had gone down that route day one I'd be surprised if they couldn't have got people to switch to a standard annuity mortgage which they could have sold on.
 
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No on the 100K deposit. If banks can deposit over night savers money with ECB can they not do the same with these. Is it not still instant access? Genuine, I don't understand.
 
Keninf said:
No on the 100K deposit. If banks can deposit over night savers money with ECB can they not do the same with these. Is it not still instant access? Genuine, I don't understand.
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No.
The deposit is a liability, not an asset. UB didn't sell any deposits. For UB to transfer a deposit to another bank, they need to transfer money to that bank.

So if you have 100k mortgage, fully offset, UB transfer 100k to another bank for the deposit. Then they transfer the loan, and get 100k back. So the net effect is the new bank has got nothing except the potential that the customer will want to get their 100k back out at a timd outsude the banks control, typically at a very low tracker margin.
 
Monbretia said:
It's far too late from them to do a deal with customers
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Absolutely. Far too late. Danske bank still haven't fully solved it and they're years ahead.
Unless UB can make an agreement with every customer, their only option is to sell the book at a knockdown price.
 
RedOnion said:
No.
The deposit is a liability, not an asset. UB didn't sell any deposits. For UB to transfer a deposit to another bank, they need to transfer money to that bank.

So if you have 100k mortgage, fully offset, UB transfer 100k to another bank for the deposit. Then they transfer the loan, and get 100k back. So the net effect is the new bank has got nothing except the potential that the customer will want to get their 100k back out at a timd outsude the banks control, typically at a very low tracker margin.
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But they would still have my loan.... But yes in that scenario why would a bank invest 100K for for a return they are already getting, without the hassle of managing these mortgages.

Thanks for your patience RedOnion.

I guess it now depends on the difference between the loans and facilities. And what write down would entice a bank to take them.
 
Keninf said:
But they would still have my loan.... But yes in that scenario why would a bank invest 100K for for a return they are already getting, without the hassle of managing these mortgages.
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I'm not sure you've fully got it yet.

For a fully offset mortgage:
  • The new bank pays zero.
  • They have a loan for 100k, earning zero interest. And a deposit for 100k, again at zero interest.
  • So they have nothing, and earning nothing.

However, they have a commitment to lend you 100k, based on 2007 margins, and nothing about your financial circumstances now changes that. It's not like you applying for a new 100k loan where they can say no. They have to set aside an amount of their own funds (capital) against that. Capital is expensive, and could actually be earning them money elsewhere. On top of that, IFRS9 accounting standard requires them to set aside a provision now, even though there's effectively no loan yet.

So, they're losing money already. A lot.

Now, throw on top of that the fact that none of the remaining banks actually has the technology in place to manage offset mortgages. That costs millions to put in place. Danske managed to outsource it (again at a very large cost), but limited the number of withdrawals their customers can make each year.
 
I wonder what was the original business model of these offset mortgages?
If they are so complicated to manage, were they ever profitable or were they just a marketing stunt at the time they were in fashion?
 
The amount the bank has to allow for though does not remain at the 100k o/s originally if that is what you mean, the 'available facility' goes down over the course of the mortgage so the bank is not in a position where the customer can go back up to original amount on the same terms. My 'available facility' that I can re-draw down now added to my o/s balance is way down from the original loan amount. I'm not at home to check the most recent statement with the figure on it but the facility reduces regularly over the term.
 
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