BANK OF Scotland said yesterday it was prepared to restructure the debt of buy-to-let borrowers in Ireland who have fallen deep into negative equity although it said it would only do so in exceptional circumstances.

The property crash has left many small-scale property investors in serious financial difficulty as they cannot meet their mortgage repayments or sell their properties for anything close to the sums they paid for them.

The Bank of Scotland move would allow at least some of these investors to sell properties for less than the value of the mortgage and not be burdened with debt as a result of any shortfall.

While the bank – which no longer operates in the Irish retail market – said its policy still required customers to pay their debts in full, it admitted it would also work with customers to restructure their debt in bona fide cases.

The bank, whose mortgage loans are now managed by 800 former employees working for a company called Certus, said it would “of course work with customers to restructure their debt on an exceptional basis and when the bona fides need arises”.

It went on to say that its policy was “not to discuss individual cases in public forums”.

According to some reports, the bank may now also be willing to write off at least part of the capital owed by owner occupiers who need to sell but cannot because they are in negative equity.

Chief executive of the Irish Brokers Association (IBA) Ciarán Phelan said it was “a move in the right direction” and added that the IBA believed “other banks should also show the same level of commercialism and provide workable solutions . . . you cannot get blood from a stone.

“People want to pay their debts but simply cannot afford to repay the same amount under terms that were initially agreed in very different economic circumstances.”

Meanwhile, PIBA, the country’s largest group of independent mortgage and insurance brokers, warned of the likelihood that other lenders would follow KBC Homeloans’ lead and increase their fixed interest mortgage rates.

KBC announced a rise in fixed rates by up to 1.05 percentage points with immediate effect.

The bank’s two-year fixed-term mortgage increased from 3.7 per cent to 4 per cent, a move which will increase the monthly repayments on a mortgage of €300,000 by more than €60.