PTSB & INVESTMENT PROPERTIES

Residential property prices look set to tumble yet further following a demand from Permanent TSB to thousands of buy-to-let borrowers on their books to begin paying off in full their mortgages on investment properties.

The bank has told investors who had availed of a three-year interest-only repayment period they will have to stump up capital and interest once the grace period has expired, according to The Sunday Business Post.

If a PTSB client had a €1.5m residential investment mortgage on a tracker rate of 1.75% with 20 years left to repay, their interest-only monthly bill would be €2,187.50. However, if forced to repay capital and interest, this figure would shoot up to €7,411.93.

If borrowers can’t afford the increases, they will be offered a two-year interest-only extension but at higher variable rates than at present.

DJ Donovan, a mortgage broker with All Ireland Mortgages in Cork, said a large number of PTSB clients would be unable to pay, leading to a fire sale of properties that could depress the entire residential property market.

“I would envisage a large proportion of PTSB clients will end up in financial distress, as they will not be in a position to meet the increased monthly payments of either capital and interest payments or a higher variable rate if they opt for an extension of the interest=only period,” he said.

He added that such investors could be “forced to dump properties on the market, with few willing buyers or financing options available at the moment”.