PERMANENT TSB has been threatened with legal action after telling buy-to-let investors who are on tracker mortgages and making interest-only payments that they must enter new lending agreements.
A spokesman for the Protect Our Trackers group, which announced its formation yesterday, said the lender has been writing to its buy-to-let customers since last November, informing them they must change to capital and interest repayments or switch from tracker rates to standard variable rates.
He said many of the investors could not afford to pay the capital and the interest, and he claimed the lender was putting undue pressure on people to switch to interest-only contracts on variable rates, which would see the typical repayments almost double.
The group says ahead of last week’s ECB rate hike, a customer who borrowed €300,000 in 2005 over 25 years was paying about €525 per month interest-only. This will rise to about €1,600, to cover both the mortgage principal and interest, if Permanent TSB’s decision stands. At the standard variable rate being offered, it would increase to about €800 a month, the spokesman said.
While the lender has told affected customers its terms and conditions allow it to review loans after set periods, the group says it has sought legal advice and is preparing to take a court action to stop Permanent TSB from asking for capital repayments.
As a first step, Dublin-based solicitors, Walter Odlum Company has written to the lender on behalf of the group calling on it to reinstate the loan agreements.
“We think there could be around 18,000 mortgages involved,” the group’s spokesman said. “That is based on the numbers of buy-to-let investors who took out mortgages on an interest-only basis with Permanent TSB between 2005 and 2008.”
“Most of the people affected can’t pay the capital and interest and our big concern is the preferential variable rates that the lender is offering to people who want to stay on an interest-only deal are for two years after which they could climb dramatically. The main purpose of this seems to be to get people off trackers.”
A Permanent TSB spokesman said the move was only directed at people with investment properties and has “nothing to do with customers whose mortgage is for their main home”. He said the bank was saying to customers who were on interest-only for at least three years “and in most cases longer, that it’s now time to plan to pay off the capital outstanding”.
He said if customers did not begin to pay off capital at some stage “they will pay interest-only for 20 years or longer and are left with no way to pay off the outstanding capital”. He said if customers began paying off the capital, their tracker mortgages would be unaffected.
“However, if one of these investment customers requires us to extend their period on interest only, then we do so on the basis that they pay a higher margin on their interest only portion of the loan. We are entirely within our rights in doing so and will defend any actions taken on that basis.”
