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Jun, 2010

Bad news on the horizon for anyone canny enough to have taken out a tracker mortgage to pay for investment property. Permanent TSB is apparently plotting what The Sunday Tribune describes as a “controversial assault on loss-making tracker mortgages by resetting the monthly payments it charges investment property borrowers”.

Apparently, from this autumn thousands of small landlords and holiday home owners face exponential rises in monthly payments and interest rates. Other banks will follow suit if the PTSB convinces the Financial Regulator this move is legitimate.

Lending for investment properties accounts for 25% of the bank’s outstanding mortgage debt and customers who typically borrowed money for 25 years did so on an interest-only basis.

However, the bank believes the small print on these contracts now gives it the right to review the terms and conditions. It plans to write to these borrowers demanding both interest and capital repayments – something that could push repayments on a €500,000 loan up from €730 a month to €2,470.

Many will be unable to afford this 250% increase and will be offered a higher tracker rate as an alternative or a “suite” of variable interest rates at much higher levels.

Michael Dowling of the Independent Mortgage Advisers’ Federation is warning of the risk of “a US-style wave of borrowers throwing in their keys because they cannot afford the new repayments”.

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