What happens to mortgage if bank fails?

Johannalala

Hi

I was wondering if anyone can tell me theoretically what would happen to your mortgage if the providing bank should fail?

Is this something worth taking into consideration when taking out a mortgage?

Many thanks!

zzzLazyDaisy

Do you mean 'would I still have to repay the mortgage if the providing bank failed?'

If so, the answer is 'yes'. What do you think happened when Northern Rock failed?

opinions4u

Somebody else buys the debt and you have to keep on paying.

Is this something worth taking into consideration when taking out a mortgage?

No.

Johannalala

Ok great, thank you.

I would hope this would be quite unlikely to happen at the moment, and had assumed you would continue paying the mortgage in this instance, but wanted to make sure there was no way you would lose out, or if it was likely any of your mortgage terms would change if the bank failed.

I'm a FTB considering taking out a 5 year fixed rate Post Office mortgage, so provided by Bank of Ireland UK.

Was wondering whether to be in any way concerned that it's linked to an Irish bank - taking into account recent problems with Irish economy.

I also understand that Bank of Ireland recently controversially changed the terms on existing tracker mortgages for some customers so that they will need to pay much higher rate of interest than that laid out if their current mortgage agreements.

This also concerns me a little, but I'm considering going for Post Office anyway as the rate is particularly good!

ACG

If the bank fails, someone would buy its back book and just manage it. I wouldnt let it be a deciding factor in your mortgage personally but everyone has their own opinions.

Annisele

Most mortgage contracts have something in them that says "the lender can change the terms of this contract in the following circumstances...".

Whether the bank is allowed to make any particular change might ultimately be a matter for a court - there's a bundle of legal rules about fairness.

But I agree the others. When you take out a mortgage, the debt is your liability and the bank's asset. If the bank goes under, it'll sell its asset to some other bank - so you'll still have to pay the mortgage on the same terms as before. However, those terms can usually be changed by either the old or the new lender.

gazter

Johannalala wrote: »

Hi

Is this something worth taking into consideration when taking out a mortgage?

Many thanks!

You are borrowing the money off them, them not off you. Any organisation that buys on the debt could only call it in in circumstances that the loan agreement says.

What you have is an extremely sell able low risk secured debt. Any lender wouldnt have difficulty selling your debt on.

kingstreet

FWIW many BoI borrowers are complaining they have no customer retention products and no choice but a highish SVR at the end of their initial rates with Post Office.

This can be a problem if you are unable to remortgage, perhaps because of a change of circumstances.

Johannalala

Great, thankyou for all the responses!