Will Ulster bank do deals or make a huge loss on Offset Flexible Tracker Mortgages.

How long might you be waiting? The answer is how long is left in your mortgage.

As it stands no one is buying this mortgage book so Ulster won't be able to close it on you.

Don't worry about all the noise about account closures and the like. Unless there is a significant development you're with Ulster for the foreseeable future.

How many offset mortgages would they have at this stage? I can't imagine it makes up a significant part of their loan book, not sure how huge a loss it would be.

What you say makes sense for an Ulster Bank that was a going concern that could take advantage of economies of scale. but if it sells off all its other assets its fixed costs are spread over a much smaller pool of assets. An individual loan could be profitable but when you add in fixed costs related to regulation, compliance and whatever else go into running a bank could make it loss making .

There is no point offering individuals deals unless all agree and that's unlikely to happen. If their hands are tied until all of these are off their balance sheet they just need to offer them at a greater discount to another bank. Take the hit and be gone. My guess is they didn't want to impact the price they would get on their normal mortgage book so will wait for the transfer to be completed before marking these down at a discount.

I don't think they are going to exit the market entirely. They may keep their license and gradually wind down some accounts but effectively be closed as a retail bank.

Danske bank still operated here for several years after they closed their retail arm (they still operate at a private client and corporate level)

I suspect that they will hand management to Pepper at some point in the future, but I can't see any change in the next 2 years.

Offset mortgages were popular in the UK. In mid 2000's they accounted for 7% of the UK market. First active offered them until 2007, so there could be a substantial number of account holders out there and therefore more likely that UB will let them play out via some service agreement with Pepper or similar

So I wouldn't be counting on any discount

To me your logic is the reason why offering a discount to customers makes little sense. If even one offset customer keeps their account open they need to maintain a license here with all the associated costs.

The Danske example is a little different as they were an EU bank so could just move anything left around to their HQ and run it from there. Not so easy for NatWest now they're out of the EU. It would be much neater for Ulster to package them up and sell them to another bank.

At full price they are unattractive but at some discount - it might well be a massive discount that values these things close to zero - these loans will represent a good bet for some bank. The question is how does the discount an AIB/PTSB would need compare to the cost of operating a zombie back for NatWest.

I imagine they are getting the easy to value stuff sold first. Hence the tracker and performing mortgage sales to AIB and ptsb. Then they can turn their attention to this niche book. Even with the best intention Ulster will be here for another couple of years so this could be a slow burner (...or the sale might just get announced out of the blue in the future).

Well, at present there is a physical branch nearby, as well as having online access. Is it not reasonable to expect this to remain the same going forward?

So what’s the verdict? Add savings to equal the mortgage and not pay any interest, or not? Pros/cons please.

Ulster won’t negotiate with me.

By matching my outstanding mortgage in my offset account, am I severely reducing my chances of future negotiations with whoever ends up owning my mortgage?

Also, from way back, I remember an Ulster member of staff saying that once my savings matched my mortgage, or went over a tipping point, they would automatically be used to pay off my mortgage!

Regarding adding savings to equal the mortgage, if you put those savings on deposit elsewhere you'll get absolutely next to nothing, and what you do get you then have to pay DIRT tax on. If you put them in an offsetting account against your mortgage, then you're essentially getting a return equal to your mortgage interest rate. So if your mortgage interest rate is 3%, your offset savings is saving you that amount. To my mind that is a very efficient use of your savings because I'm not aware of any savings account out there that would give you 3%, and you don't have to worry about DIRT. I'm open to other viewpoints on that though.

Regarding your question about matching your mortgage with savings and that affecting any potential negotiation of a discount, I have no idea if that makes your mortgage more attractive to them or less attractive to them, in the context of them selling the mortgage on to another institution. One one hand, I can't see how they are making money off you if you're not paying interest. On the other hand, your mortgage from their perspective is safe as houses, they know that you have the money to cover it. I really don't know. I imagine that if a buyer is looking at taking these on, first and foremost they will be looking to make money on whatever mortgages they buy. Bear in mind that they will most likely need to offer the same terms and conditions and features as Ulster Bank do, ie. the ability to offset. A buying bank would need to build these capabilities before they can accept them, I'd say if UB find anyone to take these on they will probabably have to offer a big discount. There's also a chance that UB won't find anyone to take these on and will need to keep managing them themselves.

And finally to your last point about your mortgage being automatically redeemed if you match it fully with savings. That does not happen. I'm offsetting the full amount of my mortgage with savings and have been for some time, and that did not trigger an automatic redemption.

I think there's an element of wishful thinking in that. I would imagine that the vast majority of these mortgages are not being covered entirely by savings. I'd say there's a wide range of how the offsetting is used across the whole mortgage book, ranging from no offsetting being used, to some offsetting being used, to some people fully offsetting. But I'd say there's probably not that many people in that latter category. So this book is probably profitable for some bank that has the capability to manage them assuming the price is right.

I think it will be a job-lot type of situation, they will either offload the whole lot to another bank, or they'll continue to manage them themselves. If they continue to manage these mortgages themselves they could take steps to keep their footprint as minimal as possible, ie. they could go to an online-only model, have an offsite call center to field queries from customers etc. I honestly can't see them offering discounts to customers to redeem their mortgages because what happens if some people can't or won't avail of the discount? They are back at square one and will need to continue managing the mortgage.

But this is all just speculation, us normal punters are only guessing what might happen. We'll know in due course, and there's nobody, apart from Ulster Bank themselves, holding a gun to their heads to get them to conclude their business in Ireland by a certain date. They could be at this for years.

Whatever about offering discounts to redeem the mortgages which as you say would not suit everyone as not everyone can refinance elsewhere a better option might be offer all offset customers a fixed rate with option for back to lower tracker should that be more benefit that makes it attractive to switch to a standard mortgage and leave the offset system and then they could just flog them to where the existing ones went.

Mind you a sweetener of a discount off them might be needed as well but I'd say the right rate could encourage most and any like me who are paying no interest due to offsetting, well I might be happy with the discount as obviously I'm in a position to clear the mortgage anyway if I so choose!

Of course that would require engagement with customers individually which most seem to think won't happen. Many years back when CAM (Current Account Mortgage), the original mortgage name when it was launched, changed to Offset there were changes that customers had to agree to individually regarding the payment options and it was managed. Admittedly a more minor change but if it was done before branch closures then each branch would just have to contact their own customers.