Mortgage-holders with PTSB seek injunction to keep interest-only deal
Published 08/09/2011 | 05:00
Number of investors affected
A COURT hearing to stop attempts by Permanent TSB to force buy-to-let investors to come off interest-only deals or lose their tracker mortgages is to be held next month, it has emerged.
Some 14,000 investors have been told by the bank that they will lose their trackers if they do not start paying back the capital, as well as the interest, on their mortgages.
Investors who took out buy-to-let mortgages with the lender typically are only paying the interest on the mortgage, with the expectation that they make a balloon payment at the end of the 25-term of the mortgage.
They usually have trackers, set at a knock-down margin at 0.75pc above the ECB rate.
Lawyers representing some of the investors said the bank was now willing to be more flexible after it filed a legal action.
A hearing to seek an injunction has been secured by Dublin solicitor Walter Odlum for Monday, October 17.
The bank has softened its stance on the threat to force investors off their trackers and on to more expensive variable rates unless they start paying off the capital they borrowed. It had originally wanted the capital repayments to start from this month.
Coming off interest-only and paying off the principal would see repayments on a €300,000 mortgage go from €500 a month to €1,600.
Permanent TSB has begun to write to the affected customers offering to extend their interest-only period until next February.
It is also understood to be looking at a number of options to make it more attractive for investors to begin making capital payments.
These include allowing investors to stay on their trackers, but at a higher margin.
Also being considered is extending the term of mortgages for investors. Most have paid five years off the term and have another 15 to 20 years to go.
Permanent TSB may be willing to extend the term by between five to 10 years to lower monthly repayments.
Mr Odlum, who has been retained by the investor lobby group Protect My Tracker, claimed yesterday the prospect of legal action had forced the lender to offer better terms to investors.
However, the bank is understood to be more concerned about the large number of investors who have gone into arrears as they are unable to meet both capital and interest payments.
The bank insists it can alter the contracts, and force investors off trackers, as it has inserted a clause in the contracts that allows for a review after either three or five years. It maintains the mortgages are commercial loans.
But Mr Odlum insisted that the contracts were contradictory. On the one hand they promise to allow borrowers to stay on interest only for the full term and make a balloon payment at the end, but the contracts also allow Permanent TSB to review them after three or five years.