PERMANENT TSB will soon inform 800 customers paying interest-only mortgages on buy-to-let investment properties that they must start repaying capital on the loans as well as the interest from January or they risk losing favourable tracker rates.

Approximately 14,000 landlords who drew down mortgages to buy residential investment properties will be affected by the change, which will come into force next year.

Most customers received up to five years interest-only on the loans.

The first 800 affected customers will receive letters from the bank in September.

Irish Life Permanent’s banking unit, the largest mortgage lender during the boom, briefed managers on the change last week.

From January borrowers who cannot meet both interest and capital repayments can still be shown forbearance by the bank but they risk losing the low-margin tracker rate over the European Central Bank rate. Some buy-to-let borrowers have rates at a margin of 75 basis points – 0.75 of a percentage point – over the ECB rate.

Loan repayments could more than treble under the change.

A spokesman for Permanent TSB stressed that the changes would have no impact on borrowers with tracker mortgages on their principal residences and that there has been no change in policy on these home loans.

Interest-only mortgages were common among buy-to-let borrowers during the boom as borrowers took advantage of rising prices and a buoyant rental sector.

Mortgages on residential investment properties totalled €27 billion across the Irish banking sector at the height of the boom.

In a separate development, the Department of Finance expects to receive the interim recommendations today from the expert group set up by the Government to assess how to help mortgage holders who are struggling to meet repayments on home loans.