Irish buy-to-let investors feel the pain on margins

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by Gill Montia

A report in the Irish Independent claims that lenders in the Republic have increased margins on buy-to-let mortgages from an average 1.78% in September 2008 to a current 3.15%.

The newspaper found that Irish building society EBS, its offshoot, Haven, Ulster Bank and First Active are charging the highest margins for buy-to-let investors.

For those taking out a new buy-to-let loan today, the research shows that the average margin over the European Central Bank rate (currently 1.5%) is 3.15%, which compares with an average margin of 2.15% for residential mortgage borrowers.

Lenders argue that they are dependent on the Euribor interbank rate, rather than the European Central Bank rate, to fund their businesses. However, Euribor fell to 1.57% last week.

In addition, lenders have increased deposit requirements to between 15% and 20% of a property’s value for investment purchasers.

According to the report, Irish landlords are also facing similar problems to those experienced in the UK as a rise in vacancy rates puts downward pressure on rents.