I am very confused about what’s happening with my Ulster Bank mortgage – what are my best options for switching?

Our property finance expert answers your questions

Martina Hennessy

Martina Hennessy

June 10 2022 02:30 AM

I’m very confused about my mortgage. I am an Ulster Bank customer and on one hand I have been told to do nothing in terms of switching, although I have to move my current account and my overdraft too, but my mortgage rate is 3.1% which was on a fixed rate I think, but I’m not sure if it still is.

I have around €135,000 left with 9 years to go. If I were to move it myself is it worth it, or will the bank it moves to offer me a better deal? I am particularly anxious as I see interest rates are going up. My brother-in-law says he is switching to AIB as they have better ‘green’ rates - what should I do?

Ulster Bank is selling its performing non-tracker mortgage book to Permanent TSB, so your mortgage will most likely be assigned to PTSB which will become your mortgage lender. As such, unlike your current account which you have to actively switch because it will close, your mortgage will remain in place.

Your decision is whether you should remain with Ulster Bank or look to switch to another lender if it makes financial sense to do so. It is important to understand if your current rate is fixed or variable. 3.1pc is a high rate relative to market and even Ulster Bank’s current fixed rates are lower than this.

If you are on a variable rate you have the option to lock in with Ulster Bank and assuming your loan to value, is less than 60pc you could, for example, secure a 5-year fixed rate of 2.35pc or 7-year rate of 2.8pc. If currently fixed you should check if there would be a break penalty to break out of your fixed contract and lock into one of these lower fixed rates or switch to another lender.

If you decide to switch there are some excellent rates on market, including the Green rates you mention above, which are available if your building energy rating is B3 or higher and start from 1.9pc.

It is expected that rates will increase in the near future so now is the time to explore all options.

My father owns a small commercial premises with a flat attached in a market town in the Midlands, which is worth around €225,000 based on latest valuation.

It needs a bit of work and he is in two minds about doing that given the cost - he won’t get a loan at his age. The office is let to a long term tenant, but the flat is vacant because of the state of it.

My father is now 78 and as his only son it is due to come to me whenever he passes away, but his question (through me) is whether it is more tax efficient, or makes any difference, if he gifts it now, or wills it to me? If it is passed to me, I could invest in it as owner, now?

Barry Prendiville of Nolan & Partners advises, the transfer of the property to you now from your father (a lifetime transfer) may trigger a capital gains tax (CGT) liability for your father and potentially a capital acquisition tax (CAT) and stamp duty liability for you.

If the property is transferred on the death of your father, there will only be CAT to consider as no CGT or stamp duty will arise.

If you wished to calculate your father’s potential CGT liability on a lifetime transfer of the property to you, it will be necessary to establish a base cost for the property. Depending on the history of the property, this may not be an entirely straightforward exercise.

This also assumes that your father has no CGT losses carried forward from previous asset disposals. As the transfer is between connected parties, your father will be deemed to have transferred the property to you for market value.

A CAT liability may arise on the transfer of the property to you. This liability will arise regardless of the property being transferred now or on death and is generally based on the market value of the property on the date of the transfer.

A CAT liability will only arise if you have previously received gifts/inheritances from your parents in excess of your lifetime tax-free Group A threshold (currently €335,000). If this is the case, and ignoring the annual small-gift exemption, the CAT liability will be calculated at 33pc of the market value of the property.

Barry notes that any CGT paid by your father arising from the transfer of the property to you is available to be used as a credit against your CAT liability arising on the same transaction. The credit will be capped at the actual CGT liability arising on the transaction.

Finally, a stamp duty liability will arise on the lifetime transfer of the property to you. It will be important to establish the market value of the residential premises as distinct from the commercial premises, stamp duty of 1pc will be payable on the residential part of the building.

Martina Hennessy is managing director of doddl.ie

Email your questions to siryan@independent.ie

I am very confused about what’s happening with my Ulster Bank mortgage – what are my best options for switching?

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