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

It's a good question. Even if these banks were bog standard mortgages there would be a discount involved (I'm pretty sure UB sold their other mortgages below par, might be wrong in that). But I think what would warrant a bigger discount is the following; 

• First and foremost the buying bank would need to build the offsetting capability in order to take over the running of these, if they don't have that capability already (and I'm not aware of any other currently operating bank that offers offsets in Ireland). Might seem like a pretty trivial task from a laypersons perspective. But off the top of my head that would involve changes to various IT systems, updating of product catelogs and documentation, training of staff, legalese updates, possibly updates to websites. Having spent some time working in the IT space in Irish retail banking, they are not known for being "agile". Not a huge project by any means but it's not "nothing" and the buying bank is going to have to spend time and money on this. So that will need to be reflected in the price.
• It's unknown to us what degree people are using the offsetting feature (the buying bank will know it though, it will need to be disclosed to them). But again it's not nothing and that's gonna affect the buying price. On top of that is it is unknown to the buying bank to what degree people are going to use the offsetting feature in the future. More and more people might start realising that the offsetting feature is a good use of any savings. This is more likely to happen I think as people get into the last few years of their mortgage where the mortgage balance has been reduced a lot and they might have more savings to offset against it.
• Also, under the hood, these are trackers, which are less attractive to banks.
• The size of the offset loan book is likely to work against it. Apparently there are only around 4 to 5 thousand of these. A buying bank is gonna weigh up whether it's worth all the hassle and unknowns for a pretty small loan book.

Whether this all translates to a "huge" discount, I don't know. But definitely a bigger discount than a standard transaction.

I've been following this conversation with interest (pun intended). I have an offset with savings in excess of the mortgage balance. As I read the comments it seems Jim has the best grasp of it. As far as I'm concerned, this is a UB problem, not mine.

1. I believe these are loss making to the bank, increasingly so with rising rates. Might be wrong, but the way banks fund mortgage debt on a short term basis, suggests to me that these are somewhat dud products for them. In other markets where offsets are offered, they come with higher interest rates, so if you are only partially offsetting the benefits can be eroded by paying more on the non covered balance. The UB ones are ECB trackers, so the cheapest rates, not the way the product should be.

2. There is clearly a problem for UB, they haven't shifted them and can't close the offset savings and current accounts.

3. I'm ignoring all letters from utilities to whom I have DDs from UB. It is not in my interest to make UB's problem any less by ceasing them. UB sold me an offset tracker, that requires a current account to work as an offset. I'm entitled to assume my current account will operate until I'm told otherwise.

3. They can't just transfer the mortgage. Unlike other bundled mortgages which had terms and conditions allowing them be sold, my offset mortgage has an implied current account and savings account linked to it. If they sold to AIB, they have to also open a savings and current account for me with AIB, I'd have to go through KYC process with AIB, and I believe I'd need to consent. Unlike moving my debt, I'm not sure they can move my savings unilaterally. I don't think they can legally force me to do my current account banking with AIB, just because they want it to take over the offsets.

4. I also hold in excess of the mortgage balance. One user seems certain he has been threatened that he needed to reduce the savings/current balance to the outstanding mortgage sum. I'm not aware of any such rule, had no such calls, and have not heard of any other offset holder getting them. Not doubting the original poster, but it sounds like a misunderstanding. He certainly adopted the right approach, "tell me exactly what rule I'm breaching".

5. I hadn't considered the risk for me of holding more than €100k in UB, or holding more than the mortgage balance. I don't think it's a credible risk. But I will probably reduce it down close to the balance, on the basis that it'll be harder logistically to move in future, not because there's any real danger of the funds being grabbed by a liquidator.

6. The point about the banking licence is an interesting one, a real pain if UB have to retain an operating clearing bank just to service the current accounts of offset holders.

7. It'd be logical for UB to analyse the offset accounts, target any that fully cover the mortgage, and offer say a 20% discount. Clear the mortgage at 80% value and return the savings and close the CA. Would make a lot of sense, but it's time consuming. They will be selling these at a steep discount anyway, as these products are a nuisance, but they're unlikely to do deals individually. They'd rather take a 30% discount and sell as a bundle.

8. Would also make sense for UB to look at the other partially covered ones, calculate roughly what they saved in interest historically, project this forward, and make an offer of compensation to close the account and for the mortgage holder to refinance elsewhere on normal terms.

9. I don't think UB will have the resources or head-space to negotiate individual deals to close the accounts, but if they properly resourced a knowledgeble team, came up with a suitable package, they could hugely reduce the number of problem offsets very quickly.

10. If UB do try to bulldoze through a solution which unfairly trods on offset holder's legal rights, we should reconvene back here and potentially assemble a group willing to challenge them on it.

Thanks to all who've contributed on this thread, there is scant information out there on the issue, and it's interesting to find others in the same situation.

I'd also be interested in joining such a group.

They don't seem to be in any hurry, do they? It's mid-summer now and it looks like nothing has changed really. From looking at other threads about the Ulster Bank closure it looks like some of the Tracker mortgages that were sold to AIB ages ago are still with Ulster Bank and haven't been moved yet.

I think we'll be here for a while folks. I might check back in again around halloween to see if there is any movement by that stage 😜

I wonder if this is going to impact the timeline of Ulster Bank's disposal of it's mortgage books;

If that goes against them they might be in a bit of a pickle.

Hi,

I rang Ulster Bank on 14 July for an update.

I have been an Offset holder since 2007 (formerly First Active). I now owe €147,000 and it is not linked to any current account.

I was told by an advisor on 14 July, who seemed very confident and knowledgeable that:

1. A decision will be made in the next four to six weeks (four weeks from now, but as with all these things could be pushed out).
2. The bank will be maintaining a presence in Ireland at Leopardstown.
3. He does n't think the mortgages will be leaving this Jurisdiction. (I think they would have left long ago if they could have done that).

My tuppence worth is:

1. I would obviously love a write off, but it looks like whatever bank takes it over will get it, not individual customers.
2. 5000 offset customers with an average debt of €150,000 is €750 million. It is simply unrealistic to expect that to be wrote off, although part of it could be.
3. This could go on for a few years as Ulster Bank seem to have a huge problem offloading them.

We moved home in 2020. Had 45k and 15 years outstanding. Borrowed 280k on a 25 year mortgage at all the original terms and conditions.... 1.15% over ECB on the full amount for the full term of 25years.

Was a bit of talk of porting the 45k and new mortgage on remainder but that was the mortgage advisor in UB not understanding the product and confusing it with other tracker mortgages.