Ulster Bank introduce Stress Tests on mortgage applications

ZombieChick

Hi,

I wonder if anyone can advise me about a mortgage issue I have.

My husband and I currently have a mortgage with Ulster Bank that tracks 0.39% above base rate which is great. We are now looking to move and are requesting a top-up from Ulster at 2.9% to buy the new house.

If we get this, our LTV would be about 70% on the new house and our monthly repayments would be approx 20% of our income, so well within our comfort zone. We had checked the 0.39% rate could be ported and topped-up, which it can – Ulster Bank confirmed all this via telephone in June.

We also have an additional rental property we own, which is entirely self-funding (the interest-only mortgage on that is 20% of the rental income).

However, last week (after nearly two months of saying their systems were down and they couldn’t handle our mortgage application), they finally advised us that our mortgage application has been declined. They said this was due to them running a ‘Stress Test’ on our application which involves them creating a scenario where they assume Interest Rates are at 7% and that we have started paying capital back on our rental property (which we don’t plan on doing). They said that if these conditions were true, we couldn’t afford the mortgage.

Has anyone else come across this? Are these Stress Tests commonplace or specific to Ulster Bank? Or, possibly, specific to ourselves since they don’t want to continue to lend to us at such a low rate?

I’m wondering if I have grounds for some kind of complaint for two reasons:
(1) I’m not sure they are treating all customers this way (surely most applications would fail this Stress Test?!) – is there some kind of fairness policy they should be adhering too?
(2) They are claiming that this test was introduced in July 2012 which makes me wonder if we would have had our application approved if it had been processed in June as we had wished, before being continually put-off due to their systems being unavailable.

We can obviously go and get a mortgage with another company (which I think Ulster would like!), but are then looking to be paying an extra £50-70,000 over the life of the mortgage, which annoys me hugely! If we don’t want to do this, we are stuck in the house we are in now, trapped by our great mortgage deal.

If anyone has any help or advice for us, it would be HUGELY appreciated! We are very frustrated!

Many thanks,

ZombieChick

Thrugelmir

ZombieChick wrote: »

Has anyone else come across this? Are these Stress Tests commonplace or specific to Ulster Bank? Or, possibly, specific to ourselves since they don’t want to continue to lend to us at such a low rate?

You've answered your own question.

Ulster Bank is part of RBS. Given the state of the NI/Eire housing market they are trying to reduce their exposure to the property market and encourage unprofitable business to move elsewhere.

antrobus

ZombieChick wrote: »

... Has anyone else come across this? Are these Stress Tests commonplace or specific to Ulster Bank?..

The FSA's Mortgage Market Review (issued Dec 2011) proposed an interest rate stress test on borrowers. No idea whether or not that has now been made a requirement, or whether UB has just decided to be an early adopter.

antrobus

Thrugelmir wrote: »

...Ulster Bank is part of RBS. Given the state of the NI/Eire housing market they are trying to reduce their exposure to the property market and encourage unprofitable business to move elsewhere.

There is that. My recollection is that Ulster Bank aka RBS NI has lost humongous amounts of money already.