Lenders target investors who bought in boom
Banks turn up the heat on those with second properties who are not protected by legislation
Banks and building societies are now ruthlessly targeting 'virgin' investors who bought second properties in the boom and who are not covered by family-home protection laws.
More than 200,000 people bought second properties during the boom. One in five, some 40,000 people, are now in arrears.
Many more who are notionally up to date on their payments are paying their mortgages on an interest-only basis.
As well as 'professional' property investors, many inexperienced people bought 'buy-to-let' or holiday homes to provide an asset when they reached pension age or as an investment for their children because they feared that prices would continue to rise.
Central Bank regulations now mean it is difficult for banks to apply pressure on householders who are behind on their payments on the family home but 'buy-to-let investors' are now considered soft targets by lenders.
"It's a real case of identifying the weak and pressurising them to give priority to that bank," says Trevor Grant of Mortgage Negotiators.
"The communications we've seen from banks to borrowers confirm this. Some of the letters threaten, 'We'll call to your home', even though the debt isn't on that property. This is intended to place psychological pressure on a couple and to try and identify a weak link in the relationship to force them to prioritise the bank's loan."
Mr Grant says that almost all of the borrowers that his company has advised have multiple borrowings. Some have other investment properties, all have personal loans, credit cards and even credit union loans.
"The banks who lent on these 'buy-to-let' properties are conscious and upset that other creditors -- such as credit unions, credit card companies and even other mortgage lenders -- may be receiving capital repayments," he says.
Mr Grant believes that the issue of arrears on buy-to-let properties is the elephant in the room.
"It's potentially a bigger problem than the issues surrounding family-home loans and nobody is addressing it.
"These people have no protection from the Central Bank, the lenders or other consumer-protection measures and the vast majority of buy-to-let owners are inexperienced investors and out of their depth. It's causing significant personal distress.
"A large number of them are self-employed. If they are distressed financially and mentally, it has a significantly negative impact on their business performance."
He said there were two types of buyers of additional property; professional landlords who knew the risks involved and 'virgin' landlords who bought a property because it was the right thing to do for their pension or for their children.
"The letters being sent out to these people by the institutions are very inappropriate. They serve to put the fear of God into the borrower.
"In many cases, those letters go to family homes and the loan may not be in the husband and wife's name. It may be just in the name of the husband.
"The letter is opened in the family home and all of a sudden the wife is reading that someone is going to call around to the house looking for money. It's causing deep distress, real fear," he added.
Analysis of Revenue returns show that tens of thousands of ordinary workers bought second properties during the boom.
In 2009 almost 90,000 PAYE workers filed tax returns on rental income. The Revenue figures show that in 2009 65 per cent of taxpayers who returned rental income did so for one property; a further 30 per cent declared between two and five properties; four per cent made tax returns on between six and nine properties. One per cent declared more than 10 properties.
The figures suggest that with the availability of easy credit, tens of thousands of people who were not professional, experienced property investors got into property in a big way in a remarkably short period of time and are now under immense pressure.