INVESTORS SEEKING loans for property are the new pariahs of banking – according to reports of penalistic conditions on lending.
Take the case of an accountant with an impeccable record of repayments to his lender over 18 years. No missed instalments, no late payments on a portfolio of around €30 million, which he calculates earned the bank around €3.25 million in compound interest, allowing for volatility in rates over 18 years.
Imagine his surprise, then, when his tried and trusted bank, with whom he has a “cosy relationship”, turned him down.
He wanted a mortgage around €1 million, to buy apartments in a prime location, at a discount. If he bought five, the developer told him, he could have them at €200,000 each, discounted from the advertised €245, 000 already heavily reduced to sell. As for location and value – top dollar as our informant put it.
Pristine, bright apartments with generous space and expensive fittings, state-of-the-art design looking onto the Dublin foothills. Five for €1 million: do I hear any moah offers? Going, going and, well, not gone, because the bank’s terms were so onerous a purchase would not make sense. “They piled it on,” says the accountant. “Interest at 3.5 per cent over the ECB rate, which brought it nearer 5 per cent, then ‘an arrangement fee’ of another 1 per cent of the loan, which I was never charged before. Plus a new reduced 70 per cent maximum of loan-to-value rate. With rents down about 20 per cent year-on-year, my repayments would exceed my rental stream. Also, the Budget reduced investor tax breaks on interest to 75 per cent of interest repayments. All in all, it did not make sense. I’m an accountant. I know how the figures work.”
‘I’m a property investor get me outa here’ might be a mantra for the main banks, keen to impress their new shareholder, Minister Lenihan, with a new prudence to compensate for all that profligate property lending. Which, by the way, every Tom, Dick, Deirdre and Patrick wanted at the time – and made no bones about leaning on their politicians, to lean on the banks to come up with the dosh. How time flies with a vengeance.
