I’m intrigued by this story about Ulster Bank screwing up again at the expense of their customers. However, in this particular case, I’m finding it hard to have any sympathy for the 1300 affected borrowers.
Known, contracted and agreed
These customers, who in the most part had mortgages with First Active before it was taken over by Ulster Bank, had agreed to pay interest only on their mortgages for a period after which they would convert the repayments to both interest and capital at an agreed date.
A key reason for my lack of sympathy here is the word “agreed”. The borrower agreed to this deal with the lender. They would have known what they were getting into, and would have been aware that on a certain date, they’d be subject to larger monthly payments.
It would have been noticed
But when that date arrived, and the mortgage payments didn’t increase, what did these 1300 borrowers do?
If my understanding of such mortgage products is correct, then the monthly mortgage repayments at that agreed date from which capital would be repaid would significantly increase. Using the numbers provided in this Irish Times article, the monthly payments would have increased by €500 up to €1250 per month, with the average increase being around €700.
What was done with the money?
So, you’re expecting to have to stump up €700 next month on your mortgage payments – you’re going to be ready to be able to pay it. But the demand never comes from Ulster Bank. Did the people concerned save the extra money every month, in anticipation of when Ulster Bank would finally come knocking?
Did they just merge the spending of the money into their normal outgoings – that’s a big bump in standard of living to have an extra €700 per month to spend.
Sensible
For anyone who was saving the money away monthly, at an average rate of 2.5% over the period, they could have ended up with a savings bundle where they’re comfortably able to repay the amount in one lump sum. And if they still take advantage of the Ulster Bank offer of repaying the amount over an extended, interest free, period, then they’re laughing.
Human Interest
I’d love if one of our personal finance journalists found an Ulster Bank customer in this situation and asked them exactly how this all happened. Were they aware that Ulster Bank made this mistake at the time? Assuming they said nothing, what was their thought process in deciding not to contact Ulster Bank and volunteer repayments? And what did they do with the money the expected to pay, but didn’t have to, each month?
And a question for Ulster Bank – did any mortgage customers impacted by this over the past 5 years actually come forward to highlight the problem? I’m guessing not if that didn’t trigger an earlier investigation by Ulster Bank – unless it was someone coming forward now that brought it all to light now.
This
website will save you money every time. 
“For anyone who was saving the money away monthly, at an average rate of 2.5% over the period” — If they had put it into an ordinary 30-day account at Anglo Irish at that time they could have 4.0% for quite a while before the rates there began to drop.
I have to agree with you. A mortgage is usually the biggest part of the household spending – you would have at the least have made a mental note as to when the repayments would increase, and while I can understand not noticing for a month or two, there’s no way the customers were not aware of this mistake. The Consumers Association however don’t seem to see it this way!
I was completely unaware of the need for interest and capital repayments at the 5 year stage. I thought I had an interest only mortgage for the full 11 years only to hear at the 7 year stage that this was not the case. The Offer of Advance states clearly on the first page under ‘Important Information’ that there are 132 monthly repayments of 558 euros i.e the rate at that time and only later on the third page that this becomes capital and interest repayments after 60 months. Surely contradictory statements in the same documentation is a mistake on the part of Ulster Bank?
Is an Offer of Advance saying on the first page under ‘Important Information’ that there are 132 monthly repayments of 558 euros (i.e. the interest rate at the time of starting the mortgage) and saying on the third page that interest and capital will be collected after 60 months a valid document? I was oblivious to the change to capital and interest payments after 5 years. The correspondence from the Ulster Bank came as a complete shock and I am now being treated as in arrears.