A question of money
MW writes from Galway: I exchanged £6,360 at my local credit union for which I received €8,222.30. Two days later the credit union wrote to say it had mistakenly converted the sterling using the “sell” rather than the “buy” rate.
The difference of €423.45 was taken from my account without my approval or knowledge within an hour of making the transaction. Has the credit union the right to take money from the account without my signature?
The Irish League of Credit Unions (ILCU) said there does not seem to be anything irregular based on the facts you describe, although it offered to raise the issue with your local credit union if you wish. This assumes, of course, your credit union belongs to the ILCU. Most do but some are affiliated with the breakaway Credit Union Development Association.
“This issue seems to have occurred due to human error, as a result of which the member received more money than he was entitled to,” the ILCU said. “The credit union advised the member of this mistake in writing and recouped the money. On this basis it would appear the credit union acted reasonably in order to rectify the position.”
Vote with your feet
SM writes from Dublin: My mortgage is with Bank of Ireland, with the rate fixed at 4.69% until August when it will revert to a variable rate, currently 4.4%.
I received a brochure advertising the bank’s new fixed rate of 4% for two or three years on mortgages where the loan-to-value (LTV) is greater than 75%. Should I fix again or go with the variable rate in the hope it will fall to 4% or less over the coming months?
Why do banks base mortgage rates on LTVs when a borrower’s repayment capacity is more important?
Why stay with Bank of Ireland after your current deal expires? It is competing on the basis of cash giveaways — not interest rates. New customers, including those switching mortgages from other banks, get cash rebates of 1% of the amount they are borrowing but there is nothing for existing customers such as yourself.
Brendan Burgess of Askaboutmoney.com, a personal finance discussion site, said: “There is no justification for this policy other than to exploit customers who cannot move because of negative equity or mort-gage arrears.” You could beat Bank of Ireland at its own game by moving to another lender.
KBC Bank would pay you €1,000 for switching and offer a choice of interest rates: 3.69% variable, 3.6% fixed for two years or 3.65% fixed for three years. You must move your current account to KBC to get these deals and rates are slightly higher if your mortgage LTV is greater than 80%.
Fixing a mortgage of €200,000 with KBC rather than Bank of Ireland would save you €2,850 over three years, assuming there are 20 years left on the loan.
Permanent TSB also gives €1,000 to mortgage switchers but its rates are higher: 4% variable, 3.7% fixed for two or three years, and 3.9% fixed for four or five years, for LTVs up to 80%.
While welcome, the €1,000 incentive offered by KBC and Permanent TSB is unlikely to pay for the legal costs of switching mortgage providers, which can amount to €1,700, according to Askaboutmoney.com.
Fixing looks tempting because many deals are cheaper than variable rates.
You could end up paying over the odds, however, because competition is driving rates down. “Irish borrowers pay about 1.5 percentage points more than borrowers in other eurozone countries,” said Burgess. “There is no basis for this profiteering and I expect variable and fixed rates to fall further.”
The higher the LTV, the riskier a loan is for lenders, and this is why they price mortgages accordingly. Borrowers with high LTVs are at greatest risk of negative equity in a property downturn, with the possibility that lenders might not be able to recover all of the shortfall if they repossessed the property.
Plenty to be gained by sharing your losses
WOS writes from Dublin: I have made a substantial loss on shares in Bank of Ireland and Allied Irish Banks.
My wife, meanwhile, would make a substantial gain if she sold an apartment we bought in her name in 1995. Could my losses be used to reduce the capital gains tax (CGT) she would have to pay by selling the apartment?
Would there be any tax benefit from transferring the apartment into joint ownership or into my name before a sale? I understand there is no CGT on asset transfers between spouses.
Similarly, POC writes from Dublin: I own UK shares in my name and my wife has Irish bank shares in her name.
If she sells her shares at a loss, could the loss be offset for tax purposes against gains from selling my shares?
We have been jointly assessed for tax purposes since we were married more than 20 years ago.
Taxpayers are allowed to reduce their CGT bills by offsetting losses incurred by their spouses in the current or previous years, provided they are resident and domiciled in Ireland.
Paul Wallace, a tax adviser at accountants Russell Brennan Keane, said: “Surplus CGT losses of a spouse can be set against the gains of the other spouse in a year of assessment, regardless of whether the CGT losses arise in the current year or have been carried forward from prior years, including years prior to the date of marriage.
“The married couple must be living together. It is also important to remember that, although losses are transferable between spouses, the annual €1,270 CGT exemption available to each spouse is not transferable between them.
