Monday 21 April 2014

Buy-to-let investors who can't pay to lose valuable tracker mortgages

BANKS are starting to put the squeeze on buy-to-let investors, warning they will lose their valuable tracker mortgages if they don't strictly meet repayments.

Bank of Ireland confirmed it is taking away trackers from any investors who struggle to keep up with payment demands.

The development comes as it was confirmed by the Central Bank that arrears on buy-to-let mortgages are running at twice the level seen on residential mortgages.

The move by Bank of Ireland, and its subsidiary ICS Building Society, has come as a massive shock to people with investor mortgages.

The average residential investor has just two properties, which indicates that there are a large number of small-time investors.

They include professionals like doctors, accountants, as well as shopkeepers who dabbled in the property market.

Bank of Ireland has €7bn worth of buy-to-let mortgages, with chief executive Richie Boucher warning recently that €3bn of these are "problematic".

Most of those who took out investor mortgages with the bank during the boom got interest-only deals. The interest was typically given on a tracker rate.

This means that the interest rate is as low as 2pc.

But now the bank says any investor who has come to the end of their interest-only deal would be losing their tracker rate.

It will also strip the tracker rate from anyone wanting to negotiate a deal because they can't afford current repayments.

Residential mortgage holders cannot have their trackers taken off them, under Central Bank rules.

But buy-to-lets are considered commercial mortgages, and don't have the same protections.

And other banks are now likely to follow the lead of Bank of Ireland and ICS, whose change of policy came into effect on Monday.

Banks are losing billions on tracker mortgages because the interest rates are so low. They are tied directly to the European Central Bank rate which is at an all-time low of 0.75pc.

Irish Independent

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