During the recession the term ‘Buy to Let’ mortgage was almost comparable to using an expletive such was the disgust of many to the contribution such mortgages made to the property crash. But they are making a comeback.
ICS Mortgages is offering its customers an interest free mortgage for up to 15 years.
Politicians were first to jump in with their concerns. Fianna Fáil finance spokesperson Michael McGrath said “Some might say that a ‘Buy to Let’ mortgage is being offered to landlords for investment purposes. But because of full recourse lending here, these loans could result in judgments against individuals and will be registered against family homes. When you look at the existing stock of around €25 billion of buy-to-let loans in Ireland, there are currently around 30% already in arrears.”
On Ireland’s popular Morning Ireland Show the CEO of the bank said he is not concerned about their interest-only product. He said similar products are available and popular across Europe.
Mr McGrath said that currently 85% of the borrowers own three properties or more. Also, they can make payments any time. He said the reason they favour interest-only mortgages is to allow them to maximise their monthly cashflow. It gives them more freedom, and is also more tax-efficient.
He said that in the past banks were lending up to 90%-100% interest-only mortgages and this obviously caused issues. But he said, under new rules set out by the Central Bank this is now capped at 70%. “In fact the majority of borrowers at ICS borrow around 55%”.
The CEO added there are stringent stress tests applied. This includes rental income, vacancy periods and interest rates. This offers protection to both the lender and the borrower. He said there is “no shred of evidence” that interest- only mortgages have been the cause of loans going into arrears.