Bank's move may tip property market into chaos
Published 29/11/2012 | 05:00
THE buy-to-let beast is about to come out of hiding and wreak havoc.
It looks like Bank of Ireland boss Richie Boucher has goaded the nasty animal into action.
The scars are set to be felt through middle Ireland.
Lawyers, shop owners, gardai, teachers and doctors are the vulnerable ones – a consequence of middle Ireland getting too heavily into debt to buy investment properties.
These people bought houses and apartments hoping the values would keep rising, providing them with a rental income and a valuable asset that could be sold to give them a pension.
Most have an average of just two buy-to-lets, but for many the investment has become a financial disaster.
The move by Bank of Ireland, and its subsidiary, to strip these investors of their trackers if they do not strictly meet the agreed repayments is likely to be copied by the other lenders.
Low interest tracker-type mortgages are keeping many of these amateur investors afloat. Even still, some 50,000 of the 150,000 buy-to-let mortgages are in arrears or a deal has had to be done on repayments.
Earlier this year Central Bank Governor Patrick Honohan bluntly told the banks to repossess investor properties if repayments were not being made.
But banks are reluctant to become mass landlords and do not want to flood the market with distressed sales at a time when house prices are so fragile.
The move by Bank of Ireland may be enough to tip the property market into chaos.