Value of building society membership

PERSONAL FINANCE: YOUR QUESTIONS ANSWERED Q I have a fixed-rate bond with Irish Nationwide due to mature shortly. As I have held this for two years, it qualifies me as a shareholder.

However, it seems to me that following the banking meltdown, this status, which would have been coveted even two years ago, is now worthless and that the only consideration in deciding whether to continue as a member and reinvest in a fixed bond or withdraw savings altogether would be the interest rate offered. Could you please give your considered opinion?

I also have a share account with EBS for many years. Is the value of being a member there also worthless if the proposed merger between the two societies goes ahead?– SEAMUS CLERKIN

A

The situation with EBS is not clear-cut but there seems little prospect of a windfall in the short term. As far as Irish Nationwide is concerned, it will be the distressed seller in any merger with EBS. While no official statement has been made on the issue of loyalty payments / windfalls, it is inconceivable in the current circumstances that Irish Nationwide would be allowed to disburse such funds to members. It is effectively broke.

On that basis, the savings rate on offer – from Irish Nationwide and competing institutions – should be one of only two considerations. The other, if you are investing in a product that will mature later than September 29th this year, is whether the institution has signed up to the Government’s new extended guarantee (Eligible Liabilities Guarantee). Only companies that sign up will have their products protected after September 29th – for up to a further five years. Bear in mind that coverage will extend only to products sold between the date the institution signs up to the guarantee and September 29th.

SWITCHING MORTGAGE AND INTEREST RELIEF

Q

If we switch our mortgage will we lose mortgage interest relief (TRS)? We bought a house as first-time buyers last year. We should be entitled to TRS continuing. However, we are on a standard variable rate and, if we switch to a fixed-rate option with our bank, that is no longer considered a “first-time buyer” package. It’s the same house and effectively the same purchase owed to the bank, but if we switch plans (get a new mortgage) will we no longer be considered first-time buyers and lose our tax relief?

– A L, LIMERICK

A

You will not lose your relief. Your classification as a first-time buyer in terms of your loan is distinct from your position as a first-time buyer for the purposes of tax relief. The bank is simply applying that “first-time” tag to a tailored loan aimed at that segment of the market. If you wish to change to a different loan – say a fixed rate – you may no longer be a first-time buyer for the bank but you remain one in Revenue terms. The rules state that – for the purposes of tax relief – mortgage holders remain first-time buyers for seven years even if you sell your home and buy another one. On that basis, there is no way switching the loan to a different product within the bank could disbar you from relief.

This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering questions. All suitable queries will be answered through the column. No personal correspondence will be entered into.

Please send your queries to Dominic Coyle, QA, The Irish Times, 24-28 Tara Street, Dublin 2. E-mail: dcoyle@irishtimes.com