Permanent TSB to stop interest-only mortgages

PERMANENT TSB is planning to stop offering interest-only mortgages to new customers.

There are fears other banks could also pull this offering, which allows people to pay lower mortgage payments if they are struggling.

Permanent TSB was the first bank to hike standard variable interest rates, which resulted in higher mortgage charges for customers.

The interest-only facility is understood to be still being made available to existing mortgage customers.

Sources said however any new home loan customers will have to pay capital and interest on the mortgage from the beginning of their loan term.

The bank is also understood to be currently reviewing the possibility of a further interest rate hike.

Permanent TSB has raised its standard variable mortgage rates by 0.5% on two occasions inside the last 12 months – last July and in February of this year – bringing the rate to 3.69%.

The bank’s chief executive Kevin Murphy said earlier this year it would be reviewing rates again around the middle of this year. Permanent TSB is expected to release a statement shortly in relation to any changes on mortgage terms.

Brokers have said they have concerns lenders could end interest-only payment terms before the end of the contract.

“Many investors could be caught short if lenders chose to end interest-only loans three years into a five-year term,” said one broker.

Meanwhile, consumers were warned not to consider interest-only mortgages or a moratorium as first option when dealing with debt by the Debt Managers Association of Ireland, (DMAI).

Chairman of the recently formed DMAI, Eugene McDarby, said he is concerned money saved by availing of these options could be used to pay off other personal debts.

“I am hoping to see a situation where the whole client debt position is looked at first by the mortgage lender before a decision is made on the mortgage repayment options,” he said.

Director of the Irish Mortgage Corporation, Frank Conway, has called for a debt expert group, to deal “head-on with a significant and growing debt problem in Ireland”.