An increase from 8.05% to 9.05% on the interest rate of a buy-to-let mortgage has been labeled “outrageous” by a borrower affected by the full one-percentage-point rise.
While this rate is double what is currently available in the market, borrowers with loans managed by Pepper are mostly unable to switch to another lender.
In a letter to the borrower, Pepper stated, “We are writing to advise you that the interest rate on your loan will increase from November 1, 2023.”
The letter further explained that the interest rate would rise by one percentage point, from 8.05% to 9.05%.
It is understood that this latest increase is a result of a previous rise imposed by Pepper, which manages thousands of mortgages for vulture funds, in July.
The borrower, who wishes to remain anonymous, expressed their outrage, stating, “It is outrageous. Once your loan is sold to the people behind Pepper, the feeling is they can charge what they like.”
They also mentioned that the rental payments from the property do not cover the mortgage repayments.
The borrower further explained, “We received another letter two months ago informing us of a full percentage point increase at that time as well. It seems they increase the rates by a full percentage point each time.”
In August, Pepper notified other customers with loans owned by vulture funds and serviced by them of a 0.75-percentage-point increase in their repayments. According to the Central Bank, around 32,000 borrowers whose loans have been sold to vulture funds have faced financial difficulties.
It is understood that Pepper has not raised residential variable rates since announcing an increase in July.
Recent letters sent by Pepper to borrowers have warned about the rate increases announced in July. This comes after a series of rate rises by the European Central Bank.
Experts in personal insolvency have reported a four-fold increase in queries from homeowners with loans owned by vulture funds who are now considering personal insolvency arrangements.
Debt restructuring experts have stated that borrowers with alternative payment arrangements are now facing difficulties due to a series of rate increases. They claim these borrowers are being pushed to their limits. Credit servicers like Pepper argue that they do not offer fixed rates, making it impossible for most borrowers on variable or tracker rates to switch to fixed rates.
However, in some court-approved insolvency arrangements, Pepper has recently been forced to offer fixed rates.
People whose home loans were sold to vulture funds, known as “mortgage prisoners,” are unable to switch to another lender for lower rates due to past arrears, which other lenders do not accept.
Recently, the Irish Independent reported a surge in arrears in a portfolio of Irish mortgages worth €500 million that was sold to vulture funds and is now managed by Pepper.
When asked about their actions for mortgage prisoners, the Central Bank stated that they are currently working with lenders and credit servicing firms to enhance the support available to borrowers in, or facing, arrears.
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