Banks turn up the pressure on buy-to-let investors | The Post

A number of banks are preparing to put the squeeze on buy-to-let investors by refusing to allow any further extensions of interest-only periods on their mortgages.

Up to now, thousands of buy-to-let mortgage holders have been benefitting from interest only periods on their loans even after they were due to revert to paying down some of the principal. Banks have, in many cases, simply extended the interest-only payment period as a way of keeping the mortgages above water.

However, sources in two banks with sizeable buy-to-let portfolios told The Sunday Business Post that they were set to adopt a tougher stance. ‘‘The problem is that, for some of them, they are actually doing okay and they could afford to switch to paying principal and interest," said one banker. ‘‘But others are badly hit and will seriously struggle to move on to paying down the principal. We now have to tackle this and establish who is who."

This could see an increase in repossessions of buy-to-let properties, something which is a lot less sensitive than re-possessions of family homes. It could also see tough negotiations opening up between investors who have mortgages on rental properties and their banks.

‘‘Where the LTVs [loan-to-value ratio] are seriously out, we will have to sit down and negotiate and come to some arrangements," another banker said last week.

Around 25 per cent of the residential mortgage loan book is buy-to-let. It is likely that mortgage holders in this category may be a lot less willing to try everything they can to repay the mortgages, because they are investment properties rather than the family home.

So a decision to start addressing this problem will lead to more repossessions.

The bank code of conduct on forbearance currently applies to family homes and not investment properties.

The planned move by the banks follows several comments by Central Bank governor Patrick Honohan about the need for banks to speed up their response to the mortgage arrears crisis

via thepost.ie

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