Ulster Bank’s Compensation Pledge: Ulster Bank is going to move on a group of debts that it hasn’t been able to sell. Around 4,500 people with offset debts will get money from the bank, which is closing down in this market.
The payments will be about €12,650 on average.
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You can lower your mortgage payment by using linked savings or checking accounts.
If someone puts €10,000 into an offset mortgage account and owes €100,000, they will only have to pay interest on €90,000.
With a margin of 1.15 percent over the ECB rate, the borrowing rate is tied to the ECB rate.
The bank is closing down, so it doesn’t offer any more checking or savings accounts. This means that in six months, the offset feature of the debts will be taken away.
In this market, no one else offers offset mortgages, and the bank hasn’t been able to sell the loans because they are too difficult.
First Active used to offer offset mortgages, but Ulster Bank later took over the business. But since 2008, this kind of item hasn’t been sold in this market.
Ulster Bank said it had figured out what the loss of the offset feature would mean for each of its 4,500 customers and would compensate them in January with what the bank calls “ex-gratia payments.”
The bank that is closing said that customers will still be able to use the “Pay and Redraw” service to lower their mortgage interest payments and keep their tracker rate.
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The debt will stay with Ulster Bank until the homes are sold. The pay and redraw feature is a lot like the offset function.
If someone has extra money in a savings account, they can move it to their mortgage account instead of putting it in a bank or current account that is linked to their mortgage account.
This lowers the amount of money that is still owed on the mortgage and the amount of interest that needs to be paid.
Customers can also take those funds out if they need to, as long as they follow the terms and conditions.
There is no difference between “offsetting” and “pay and redraw.” Both allow customers to lower their mortgage interest payments. Even though they work in different ways, this is the case.
As compensation for the loss of offsetting, Ulster Bank said it had figured out how much offsetting would have been worth to each mortgage account if the customer had kept it and used it until the end of their term.
The answer to this question will then be twice. Everyone who buys something will get at least a €5,000 free payment for being nice.
The biggest payment that will be given to customers as a thank-you will be equal to all of their future mortgage interest payments until the end of their term. The customer will also get €250 for free financial help.
Savings or checking accounts linked to offset mortgages must be closed within six months. The date is May 23, 2019.
What if the customer is behind on their mortgage payments? The ex-gratia kindness payment will be used to lower those late payments.
The average amount on the offset mortgages is €106,000. The loans have an average term of 11 years left.
It’s still possible for the bank to sell the offset debts.
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It sold AIB its tracks mortgage book this year and Permanent TSB its fixed-rate books last year.
Jane Howard, CEO of Ulster Bank, said, “The arrangement we have now put in place brings certainty for these customers, it retains as much of the product as possible, in particular the Pay and Redraw feature which reduces interest paid on the mortgage, while recognising the removal of the offsetting feature.”
“The solution also takes into account the future value of the product because this product is no longer available in the market.”
According to Ulster Bank, the Central Bank did not make Ulster Bank pay the money.
