Sunday Times, A Question of Money - 8 December, 2013

Posted by Jill Kerby on December 08 2013 @ 09:00

How will Danske offset impact on mortgages?

RA writes from Dublin: I am a Danske Bank customer with an ‘offset’ or current account mortgage. I am wondering what is going to happen if they close my current account as the positive cash balance in my account at any time is credited or ‘offset’ on a daily basis against my mortgage balance. If they close my other accounts then there will be no money to offset from my mortgage debt, and it will be much worse situation for me.

I see this as breaking my mortgage contract. I contacted the bank but they said they didn't have any information yet as to how they would handle this, and that I have to wait for their correspondence. Also I was not able to find any information related to similar cases where banks have left Ireland.

There is a presumption that Danske Bank borrowers will continue to make their payments to Danske Bank or its agent (as happened when Bank of Ireland Scotland withdrew) after the company quits the retail banking side of their business next year.  As your mortgage is linked to a current account – which will no longer be available to you at some point next year - this will need a different repayment solution.

There have been precedents: after First Active announced it was to close down in the summer of 2009, the outcome was a merger with Ulster Bank. Current account mortgage accounts were transferred with all their existing terms and conditions honoured.  There has been no suggestion of any kind of transfer to or purchase of Danske Bank mortgage loans like yours by another Irish bank.

You can only wait to see what solution the bank proposes and then decide whether it is acceptable to you or not. Meanwhile, you may want a lawyer to review your existing contract.



GB writes from Co Tipperary:  What is the current and future status of Irish Life shares? I accumulated in excess of 3,000 over many years, as a retirement nest egg. Now that they have been taken over by Great West Life Co, will anything formal happen to them? Is there any winding up or dissolving process that takes place? Or do we get to enjoy their languishing on the stock exchange for all eternity. I note that some publications no longer mention them in share price listings, while other persist.

Your shares would have been accumulated either as part of the share issue to Irish Life and/or Irish Permanent customers when the companies were privatised or because you purchased the shares yourself over the years.

The share price in IPGH collapsed during 2008. In the summer of 2011, the Irish government became the single largest shareholder in Irish Life and Permanent Group Holdings plc when it had to inject over €4 billion into the company.  Overnight it became the single biggest shareholder of the 135,000 shareholders, with 99.2% ownership. The remaining 134,999, including you, ended up with massively diluted share - just 0.8% of the company value.

The sale of Irish Life by Permanent TSB Group Holdings to Great-West Life of Canada in 2012 ended any connection between the original plc and the business of Irish Life. You are now a shareholder in a company called Permanent TSB Group Holding plc. Your shares are now so diluted that it is inconceivable that they would ever be worth much, even if the company market value was restored to its February 2007 peak of €6.2 billion. This is because instead of there only being 275 million shares in circulation valued at €22.80 each, today there are 36.5 billion shares circulating, with a value of just a few cent each.

While the company is still listed, I’m afraid your ‘nest egg’ effectively disappeared when the share price collapsed five yeas ago and was then forever diluted by the state takeover in 2011.


PM writes from Cork: As it is not safe to have more than €100,000 in any single bank, is it safe to have more than one Post Office Savings product – that is more than €100,000 in savings bonds, certificates, prize bonds?

The Irish deposit guarantee scheme insures the first €100,000 worth of deposit savings in banks, building societies, credit unions, ordinary post office deposit accounts. State savings products, such as the ones you have mentioned are 100% state guaranteed and do not come under the deposit guarantee scheme.

That said, there are some limits to the amount you may save or invest in tax free, 100% guaranteed state savings products. Savings certificates and savings bonds limit individual holdings to €120,000 (€240,000 held jointly by a couple) and you may only up to €1,000 a month into Instalment Savings accounts. There is no limit to value of Prize Bond holdings.

The four year and 10 year National Solidarity Bonds have individual investment savings €250,000, or €500,000 from two joint applicants and €750,000 from three  joint applicants.

Correction/Clarification:  Two sharp-eyed readers have pointed out that in my answer to Mr PD from Dublin, regarding inheritance, I failed to clarify that since December 5, 1991, a child can only inherit up to the tax-free threshold amount between a parent and child (at that time) over their entire lifetime. Before that date, the child could inherit up to the threshold from one parent and if the parent died after 1991, still inherit the post-1991 threshold amount from the other parent. My answer incorrectly suggested that this would be possible where both parents were deceased after 1991.


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