The state’s competition authority should force the permanent TSB (PTSB) not to apply different interest rates to new and existing mortgage customers and to charge higher top-up loan costs before the bank approves the proposed purchase of much of Ulster Bank’s loan book, according to a leading consumer advocate .

Brendan Burgess, founder of the popular financial website Askaboutmoney, also filed a motion calling on the Competition and Consumer Protection Commission (CCPC) to protect Ulster Bank’s vulnerable clients as they become “prisoners” of the PTSB, which generally has higher fixed mortgage rates.

“The CCPC should allow the takeover to proceed, but under certain conditions,” he said.

Ulster Bank’s parent company NatWest Group agreed last month to sell € 6.8 billion of the Irish entity’s mortgage and business loans to PTSB as it put forward a plan to exit the republic after years of subpar earnings returns. This would increase the size of the PTSB’s loan book by nearly 50 percent.

The CCPC gave interested parties until January 4th to comment when evaluating the transaction.

Mortgage rates

Mr Burgess, in his filing on the cut-off date, highlighted that while Ulster Bank offers new and existing customers the same mortgage rates, PTSB uses lower rates to attract new customers.

Ulster Bank’s lowest interest rate for existing customers is 2.2 percent for a two-year fixed term on a mortgage with a loan-to-value (LTV) of less than 60 percent. The lowest value of the PTSB is 2.95 percent for a fixed period of three years with a similar LTV.

Although the Ulster Bank top-up rate is the standard rate for each product, Mr. Burgess noted that PTSB’s top-up rate is calculated at a floating rate of 3.95% regardless of the cost of the main loan.

Still, PTSB’s floating rates are consistently lower than Ulster Bank’s, according to figures on lenders’ websites. About 35 percent of PTSB’s mortgages were fixed rate as of June, compared to 20 percent floating rate. The remaining 45 percent was made up of tracker mortgages – a product Irish banks no longer offered in 2008.

Lender Switch

Mr Burgess estimates that 20 percent of Ulster Bank’s mortgage borrowers would not be able to switch to another lender, either because of past repayment problems or because of other changed personal or professional circumstances.

“They risk going from a permanent mortgage at Ulster Bank rates to arrears at the much higher PTSB rates, making them even more prisoners of the 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 new customer rates it offers.”

A PTSB spokeswoman declined to comment on the filings to the CCPC while the deal is being reviewed.

“Our goal is to create strong competitive strength in the banking sector that offers customers more competition,” she said. “We look forward to welcoming Ulster Bank customers to Permanent TSB and can reassure them that they will be offered competitive products and services, served by a nationwide network of branches and a leading digital offering.”