THE STATE’S largest mortgage lender, Permanent TSB, has raised its fixed rates on its Irish buy-to-let investor mortgages as bank stocks tumbled amid concerns about rising arrears on buy-to-let mortgages in the UK.
Permanent TSB is raising all its fixed rates on residential investment mortgages by 0.1 per cent. Approved cases have until June 18th to avail of the lower rate. The bank has also raised its one-year fixed rate for “pipeline” buy-to-let cases – loans which have been approved but not drawn down yet – by 0.8 per cent to 5.69 per cent.
A spokesman for Permanent TSB said that, unlike other lenders, the bank had offered the same rates to buy-to-let investors and owner-occupiers, and it was changing its rates in line with other lenders. He said it was raising rates on “pipeline” cases as it could not keep loan offers “open-ended” when it had withdrawn its one-year fixed-rate mortgage generally, like many other lenders.
Irish bank stocks fell sharply yesterday as the Iseq reopened in the aftermath of the UK’s biggest buy-to-let lender, Bradford Bingley (BB), announcing a profit warning, saying it would make losses of £8 million sterling (€10 million) due to rising buy-to-let mortgage arrears. The lender also shocked the market by renegotiating its £300 million rights issue.
Concerns about BB’s mortgage book hurt Bank of Ireland, as the bank’s share price fell as much as 11 per cent, its largest decline in almost 19 years. Investors grew concerned that bad debts in its UK division would rise. The bank closed down 6.9 per cent at €7.59, the biggest drop in five years.
Anglo Irish Bank shed 7.3 per cent, closing at €7.78. Irish Life Permanent, whose UK subsidiary lends to the UK buy-to-let market, dropped 6.8 per cent to €10.48. AIB fell just 2.5 per cent to €12.58.
Emer Lang, analyst at Davy Stockbrokers, attributed the falls to negative sentiment linked to the losses at BB and concerns about UK buy-to-let mortgages. “The market is just so nervous and it is a knee-jerk reaction. Investors are not discriminating between lenders. For Anglo to fall when it is not a mortgage lender doesn’t make sense,” she said.
BB fell the most on Monday since it went public in 2000 after announcing plans to sell shares at a 33 per cent discount and saying that the housing market was deteriorating. Michael Buckley, the newly-appointed chairman of industrial holding group DCC following the resignation of Jim Flavin, became a director of BB last July.
About 15 per cent of Bank of Ireland’s profits are generated from the UK mortgage market. The bank indicated at its full-year results last month that UK mortgage arrears had increased but remained below industry levels. The bank is not expecting any significant deterioration in its UK mortgages, although brokers expect bad debts trends to rise.
Eamonn Hughes, analyst at Goodbody Stockbrokers, said the trends at BB were “unnerving on the credit quality front”.
Permanent TSB has also raised its one-year fixed rate on approved loans to owner-occupiers by 0.7 per cent to 5.59 per cent.
