The State's competition authority should force Permanent TSB (PTSB) to stop applying different interest rates for new and existing mortgage customers and imposing higher costs on top-up loans, before clearing the bank's planned purchase of much of Ulster Bank's loan book, according to a leading consumer advocate.
Brendan Burgess, founder of the popular Askaboutmoney finance website, also urged the Competition and Consumer Protection Commission (CCPC) in a submission to protect vulnerable Ulster Bank customers as they become "prisoners" of PTSB, which has generally higher fixed mortgage rates.
“The CCPC should allow the acquisition to proceed, but subject to conditions,” he said.
Ulster Bank's parent NatWest Group agreed last month to sell €6.8 billion of the Irish unit's mortgages and business loans to PTSB, as it advanced a plan to exit the Republic after years of sub-par profit returns. This would increase the size of PTSB's loan book by almost 50 per cent.
The CCPC gave interested parties until January 4th to make submissions as it assesses the transaction.
Mortgage rates
Mr Burgess highlighted in his filing, made on the date of the deadline, that while Ulster Bank offers the same mortgage rates to new and existing customers, PTSB uses lower rates to attract new customers.
Ulster Bank’s lowest rate for existing customers is 2.2 per cent, for a two-year fixed period on a mortgage with a loan-to-value (LTV) of less than 60 per cent. PTSB’s lowest is 2.95 per cent, for three-year fixed period on a similar LTV.
Although Ulster Bank’s rate for loan top-ups are at the standard rate of each product, Mr Burgess noted that top-ups at PTSB are charged at a 3.95 per cent variable rate, irrespective of the cost of the main loan.
Still, PTSB’s variable rates are lower across the board than Ulster Bank’s, according to figures on the lenders’ websites. Some 35 per cent of PTSB’s mortgages were on fixed rates as of June, compared to 20 per cent on variable rates. The remaining 45 per cent comprised of tracker mortgages – a product Irish banks stopped offering in 2008.
Lender switch
Mr Burgess estimates that 20 per cent of Ulster Bank’s mortgage borrowers would be unable to switch to another lender, either due to having had repayment problems in the past or because of other changed personal or employment circumstances.
“They risk going from having a sustainable mortgage at Ulster Bank’s rates to falling into arrears at PTSB’s much higher rates, which makes them even more a prisoner of PTSB,” he said. “The best way to fully protect these customers is for PTSB to reform its lending practices for all customers and to offer these customers the rates on offer to new customers.”
A spokeswoman for PTSB declined to comment on submissions to the CCPC as the deal is being assessed.
“Our goal is to create a strong competitive force in the banking sector that provides further competition for customers,” she said. “We look forward to welcoming Ulster Bank customers to Permanent TSB and we can assure these customers that they will be offered competitive products and services, served by a nationwide branch network and a leading digital offering.”
