Property investors lose out as lenders fail to pass on ECB rate cuts
A spokesman for Irish Nationwide confirmed that the October ECB rate cut had not been passed on to investors, while no decision had been made yet on whether to pass on last week's reduction
Tuesday November 11 2008
A NUMBER of lenders have decided not to pass on interest rate cuts to their buy-to-let customers in a move that has been described as unfair to property investors.
Building societies Irish Nationwide and Haven/EBS have decided not to pass on recent cuts in the European Central Bank (ECB) rates to property investor customers who have standard variable rate mortgages.
A spokeswoman for EBS confirmed yesterday that the October cut in ECB rates was not passed on to buy-to-let investors. The society is reviewing whether or not to pass on last week's rate cut to investors with standard variable rate mortgages.
Asked why the rate reductions were not being passed on, the spokeswoman said there were "different risks associated with investor mortgages" compared with residential homeloans.
A spokesman for Irish Nationwide confirmed that the October ECB rate cut had not been passed on to investors, while no decision had been made yet on whether to pass on last week's reduction.
One Irish Nationwide investor customer, who has three mortgages with the building society, has hit out at the failure to pass on the cuts. The customer, who did not want to be named, said he was told by Irish Nationwide last week's ECB rate cut would be passed on to buy-to-let mortgage holders but the October rate cut would not.
Mortgage brokers said yesterday the building society's standard variable mortgage rate for investors is 6.49pc, one of the highest for property investor mortgages.
Pressure
Karl Deeter, of Irish Mortgage Brokers, said banks and building societies were failing to pass on rate cuts to investors as they were able to get away with it. "Basically, the banks and building societies won't give investors any breaks because there is no political pressure to do so."
He accused lenders of making fat profits on buy-to-let mortgages.
"The margins on a loan at 6.35pc are an impressive 3.1pc over the ECB. That's almost a 100pc mark-up, even taking interbank rates into consideration (4.4pc)."
He added that most lenders will only do investment properties at loan to value of 50pc or less which meant that most investors were unable to switch to another lender. "Switching in the investor market is all but impossible in the current environment, and that's not credit crunch alone. That's due to bank lending policy becoming so restrictive," he added.
- Charlie Weston Personal Finance Editor
