PERMANENT TSB has rowed back on plans to force buy-to-let investors with tracker mortgages who make interest-only payments to switch to standard variable rates unless they start paying off the capital they borrowed.
The lender is writing to about 18,000 affected customers to tell them they have until next February to decide how to manage their repayments.
While it says it still wants to encourage investors to pay capital off their mortgages, it is to propose a number of options other than forcing people to pay off the capital or surrender tracker rates.
The proposals for investors include “significantly” extending mortgage terms, which ultimately would cost borrowers more but would greatly reduce their monthly repayments.
“We are also saying that investors can stay on trackers and pay interest only but we will change the terms so rates might go from 0.75 per cent above the ECB rate to 1.5 per cent above it,” a spokesman said.
“Our priority is to encourage capital repayments and there are some people who are relying on interest-only payments for the duration of their mortgage and that is not sustainable,” he said.
A person who in 2005 borrowed €300,000 over 25 years is paying about €525 per month interest-only. This would rise to about €1,600 to cover the mortgage principal and the interest. If the borrower switched to the standard variable rate and continued to pay only interest, the repayments would increase to more than €800 per month.
When Permanent TSB announced plans to force buy-to-let investors off trackers earlier this year, it prompted a storm of protest. Solicitors Walter Odlum Co wrote to the lender on behalf of a group of borrowers and threatened it with legal action if it did not reinstate loan agreements for investors on tracker rates.