Monday 11 December 2017

Families hit as banks slash home loan rates for investors

Chief Executive of Permanent TSB Jeremy Masding
Chief Executive of Permanent TSB Jeremy Masding

TWO leading banks have cut the interest rates on investor mortgages in a move that will further squeeze out families and first-time buyers from the market.

State-owned Permanent TSB has launched a new cut-price buy-to-let mortgage for Irish people living abroad.

And Bank of Ireland has brought back interest-only terms and low interest mortgage offerings for investors.

Interest-only mortgages have not been a feature of the market since the bubble burst in 2007.

These mortgage products – tailored to investors – come as families are again struggling to find affordable homes in some parts of the country.

Homebuyers are seeing double-digit rises in property prices in Dublin and a nationwide increase in rents.

A chronic shortage of family homes has been blamed for the price hikes.

The latest figures show that nationwide property prices shot up by 6pc in October – but mortgage lending for those who want to buy family homes is at a 40-year low.

Karl Deeter, of Irish Mortgage Brokers, said the move by banks to step up their attempts to lure buy-to-let investors would make it harder for families and first-time buyers to source properties.

"This will lead to frustration for families and new buyers

because foreign buyers are already snapping up properties in areas where it is hard to find supply."

This was particularly the case in Dublin and other cities and larger towns, he added.

Mr Deeter said that with mortgage credit in such short supply, the move by banks to renew their focus on investor mortgages would make it even harder for residential buyers to get loan approval.

Permanent TSB has dropped its investor interest rates by up to 0.39pc in a move to re-enter the buy-to-let mortgage market, the Irish Independent has learned.

The offering is aimed at Irish people who are living outside the country.

Chief executive of state-owned Permanent TSB Jeremy Masding insisted the bank was engaged in responsible lending.

The new investor product is restricted to those earning more than €100,000.

Mr Masding said the bank returned to mortgages this year.


"We have been very successful in lending responsibly to owner-occupiers this year and we are building on this success with new market-leading products for the buy-to-let market in response to strong customer demand," he added.

Meanwhile, Bank of Ireland is offering to allow investors pay the interest only for five years if they pay up to half of the property price in cash.

The head of mortgages at the bank, Aine McCleary, insisted the bank was being prudent.

"While we are very conscious of lending prudently, and each mortgage application is assessed on its own merits, we've changed our buy-to-let mortgage proposition to provide attractive one-year and five-year interest-only options for these customers," she said.

Bank of Ireland's 4.99pc variable rate is close to those being charged to existing residential mortgage holders.

But traditionally, investors pay much higher lending rates than residential borrowers.

The renewed push to sign up investors comes as Chinese and Russian buyers are reported to be flooding the housing market.

Up until now, most investors have been using cash to buy properties, pricing first-time buyers and families out of the market.

There has also been a surge of investor buying, due to plunging deposit rates for money left in banks.

And the move by Finance Minister Michael Noonan to push up DIRT on savings to 41pc from January is also drawing more people into investing in property

Investors who buy property will also not have to pay capital gains tax if they buy before the end of next year and keep the property for at least seven years.

Housing economist and Trinity College Dublin lecturer Ronan Lyons noted that interest-only mortgages have not been a feature of the property market for six years.

"Interest-only is a gamble. It is a gamble that prices will go up, and not down," he said.

But he added the move for more investors to come into the market might help improve the supply of rental properties.


Charlie Weston Personal Finance Editor

Irish Independent

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