Eviction fear for tenants as investors face bankruptcy
THOUSANDS of property investors could be pushed into bankruptcy as lenders impose increases of more than 300pc in mortgage repayments, it was claimed yesterday.
And housing agency Threshold has also warned this could lead to a multitude of tenants facing eviction from houses bought by landlords during the boom.
Demands by lenders that investment property owners start paying the capital amount on their loans when interest-only deals expire meant monthly repayments would triple, director of MoneyCoach.ie, Frank Conway, said.
Mr Conway said many investment properties were financed using interest-only loan facilities. This resulted in much lower monthly repayments for borrowers than having to pay interest and capital.
Interest-only arrangements were typically made available for a maximum of five years, although one lender did offer interest-only loans for up to 25 years, Mr Conway said.
"Property investors often secured sweetheart tracker deals from their lender, in some cases for as little as 75 basis points (0.75pc) over the European Central bank base rate.
"It is not unusual for an investment-property mortgage holder to be paying as little as 1.75pc for their mortgage," he added.
Lenders are now demanding that customers coming to the end of their interest-only loan terms begin paying back the full amount of the loan, also referred to as a capital and interest basis.
But many investors do not have the income from rents to cover the full interest and capital amount. Forcing them to pay up to three times their current repayments will push thousands into bankruptcy, he said.
And national housing charity Threshold said it was coming across a large number of cases where banks and receivers were trying to force tenants out of properties.
Threshold's legal officer Kevin Baneham said: "In the last year there has been a huge increase in these cases, and we expect to see more in terms of dealing with receivers."
He said state-supported banks were attempting to evict tenants despite the fact that the law says they should have security of tenure for up to four years once they have lived in a property in excess of six months.