Monday 19 February 2018

Ruling on interest-only deal a blow to those with investor mortgages

Charlie Weston Personal Finance Editor

THE 14,000 people who have investor mortgages with Permanent TSB received a blow yesterday after a High Court ruling on moves by the bank to take a couple off a tracker unless they started to pay interest and capital.

Mortgage broker Alan Grant and his wife Deirdre took a complaint to the financial ombudsman after the bank tried to force them off a tracker deal that involved paying interest-only.

They have three investment mortgages totalling €1.8m, secured against four properties.

Last December the ombudsman ruled in favour of the bank which was ending the interest-only period. The couple appealed this to the High Court.

The couple had been told by the bank that their three mortgages could stay on a tracker rate if they switched from paying interest-only to also paying capital back.

Alternatively, they could keep the interest-only period for another year on a variable rate of 2.8pc, as opposed to the tracker rate.

High Court judge Mr Justice John Hedigan said the bank had adequately highlighted in the loan offer that it could end the interest-only deal.

The court heard that Permanent TSB would not accept reduced payments on the three mortgages of €2,000 a month, and was within its rights to do this, the judge decided.

In his judgment Mr Justice Hedigan said: "In this case there is a surfeit of evidence to the effect that it was clear to anybody, layman or informed layman, that the bank at every turn in the documents involved herein were explicitly retaining the right to transform the loan to an interest and capital one at their discretion."

Bad news

Founder of the, Brendan Burgess, said the ruling was bad news for investors who want to hold on to interest-only mortgages, although he said the ombudsman judges each case on its merits.

Thousands of people took out tracker mortgages to buy investment properties during the boom. They were on a low margin above the European Central Bank rate, and interest-only for the term.

A bullet payment was to be made at the end of the mortgage term.

But the bank had been contacting the buy-to-let investors telling them to pay back capital and interest every month. If they were unable to also make capital payments the bank told them they would be put on to a higher variable rate.

Dublin-based solicitor Walter Odlum represents 110 buy-to-let investors calling themselves Protect Our Trackers. They back a legal challenge to the moves by Permanent to get investors to move off interest-only loans.

His case was due to be heard earlier this month but will now be heard in the autumn.

The bank issued 18,000 buy-to-let mortgages to 14,000 investors. A quarter of the mortgages are three months or more in arrears. The bank stopped writing to its investor mortgage holders last July, seeking to get them to pay capital and interest.

Some investors have already moved to paying interest and the principal.

But it is set to vigorously oppose the legal challenge being mounted by Mr Odlum.

A number of other High Court appeals of ombudsman decisions on investor trackers are due to come before the courts.

Irish Independent

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