Buy-to-let owners face losing trackers
Published 04/11/2010 | 05:00
THE country's largest mortgage supplier is writing to 14,000 owners of buy-to-let properties telling them to start paying back the capital on their second home loans.
Permanent TSB has told investors they will lose their tracker mortgages unless they begin paying back capital along with the interest.
Some investors unable to meet capital repayments will see demands jump by €1,200 a month.
An internal Permanent TSB memo -- seen by the Irish Independent -- states there is "an increased risk of allowing property investors to keep paying the interest and leave the capital untouched".
The lender has now begun to send out letters to those who have been on interest-only deals for three years or more telling them to also pay the principal.
"Commencing on November 3, 2010, residential investment property interest-only customers will now be informed that they will default to capital and interest once they have a minimum of three years interest only, in line with the terms and conditions of their mortgage," the internal Permanent TSB document says.
People who are unable to repay the capital along with the interest will be told they will lose their tracker mortgage rate. Most buy-to-let investor mortgages sold at the height of the boom were trackers. Some of these rates are set as low as 0.75pc above the European Central Bank rate.
A spokesman for Permanent TSB last night said those taken off a tracker will typically see the rate they are charged rise by 1pc.
A buy-to-let investor who is paying interest only at the moment, who borrowed €300,000 over 25 years in 2005, would have monthly repayments of €425.
If they lost their tracker and ended up paying a rate of 2.75pc, the monthly repayments will shoot up to €1,600 a month, a rise of almost €1,200 a month.
It has set up a helpline as it expects a number of customers to be unable to switch to full capital and interest repayments.
Research conducted by the Irish Independent reveals some 80,400 residential investment properties were purchased between 2005 and this 2010.
Some of these were bought with no deposit, and with interest-only deals. Many people ended up with a string of buy-to-let investments.
Irish Mortgage Corporation director Frank Conway said the move by Permanent TSB would push many investor borrowers into arrears. He said other lenders were also moving to force buy-to-let mortgage holders to move off interest-only deals.