Concern over new interest-only buy-to-let mortgages on the market

Concern has been raised over new buy-to-let mortgages being advertised by ICS Mortgages (Dilosk DAC).

The mortgages involve the option of the borrower, including private landlords, to pay interest only for up to 15 years - writes

Speaking on RTÉ's Morning Ireland, Fianna Fáil finance spokesperson Michael McGrath said he believed the new interest-only mortgages being offered posed very serious risks.

He used the example that if €200,000 was borrowed at the advertised interest rate of 4.45%, the borrower would have paid back €160,000 by the time 15 years are up without the balance being reduced.

Mr McGrath said these mortgages were being offered based on a number of assumptions, including a strong rental market and with regard to interest rates.

He said: "Some might say that these mortgages are 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."

The lender has been regulated by the Central Bank. However, Mr McGrath has called on the regulator to make its views on these loans known.

He said it was his belief that they were never fully investigated before being approved.

Also speaking on Morning Ireland,CEO of Dilosk (the parent company of ICS) Fergal McGrathsaid he is not concerned about their interest-only product. He said similar products are available and popular across Europe.

Mr McGrath said that currently85% of the borrowers own three properties or more, and 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 pastbanks 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%, and "in fact the majority of borrowers at ICS borrow around 55%".

The Dilosk CEO added there are stringent stress tests applied, including rental income, vacancy periods and interest rates,which offerprotection 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.

Mr McGrath saidthe company is regulated by the Central Bank and all its products comply with the guidelines of the European Banking Authority and he would welcome a further examination by the Central Bank if necessary.

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