Investors facing repayments squeeze as deadline on interest-only deals looms
Large numbers of investors who bought rental properties are facing a repayments squeeze.
This risks pushing up mortgage arrears.
The investors signed up to interest-only deals when they bought their buy-to-let properties during the boom.
They did this because it costs much less every month than making full interest and principal repayments on the mortgages.
But four out of 10 of those who took out an interest-only mortgage to buy a rental property face having to make full repayments in the next two years, new research out today from the Central Bank has found.
There is a big risk that these borrowers will be pushed into arrears, as rents are unlikely to cover the cost of making full interest and capital repayments.
Central Bank calculations estimate that moving from making interest-only to meeting interest and principal repayments will result in a four-fold rise in monthly mortgage costs. This will typically see repayments go from around €400 to €1,700 a month, the Central Bank academic study found.