Personal finance

Your queries answered

Can I switch my mortgage to my credit union?

Q

I am currently on a fixed-rate mortgage, which expires in August.

My mortgage provider, National Irish Bank is currently offering fixed-rate mortgages to customers. However, they say that they will not discuss the current fixed-term rates until a letter showing my options is sent out to me in July.

I am currently considering moving the balance of my outstanding mortgage to my credit union which has offered me a 10-year loan at 4.25 per cent.

Should I decide to take up the credit union option, will I have to engage a solicitor in order to redeem my mortgage with my bank?

- Ms AM, Dublin

A

I’m not entirely surprised that the bank is being coy about the likely fixed mortgage rate in August. A significant number of providers have exited the market altogether, at least temporarily, because of the cost to Irish institutions of raising funds.

In that context, it is only reasonable that National Irish Bank will want to reserve judgment on its intentions in the fixed-rate market until close to the time it is applicable to you.

If it was to give you an indication now, only to be forced to revise it or withdraw from the market by the time your current fix expires, you might feel misled.

I am surprised that credit unions, which are facing their own problems, are in a position to make a 10-year fixed offer, especially at a rate that seems to be below the current market rate – and that’s before the indication from the European Central Bank last week that it intends to increase rates by a quarter percentage point next month.

Any move to take the credit union offer now and pay off the mortgage before the end of the fixed period could lead to a charge. However, if the credit union offer stands in August, and it meets your requirements, there is nothing to stop you using the loan to pay off the bank at that time and retrieve the documents.

There is no requirement for a solicitor although it might be no harm to have one oversee the transaction to ensure there are no nasty surprises later on.

Will pensioners be hit by the Government levy?

Q

I understood that the pension levy being introduced by the Government would not affect people receiving a pension but now I hear that it will. Can you provide any clarity?

- Mr JO’L, e-mail

A

The 0.6 per cent charge is being levied on pension funds. For those being paid via an annuity purchased from an insurance company, or who have a more flexible Approved Retirement Fund, there will be no impact.

However, members of a defined benefit scheme who are being paid from that fund, rather than being paid via an annuity, will potentially be affected. The money on which they are drawing will be subject to the levy.

It is then a matter for the scheme trustees to decide whether to pass on that charge or to spread it among others, the still-working members of the fund. That issue in itself raises certain issues of fairness.

If the charge is passed on, it could mean a cut of as much as 9 per cent in payment to pensioners which is clearly a matter of concern.

You really need to contact the trustees of your occupational pension fund.

This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2.