About 13,000 people with mortgages managed by Pepper Advantage will be hit with interest rate hikes of up to 0.5 per cent from next month, the mortgage service provider has announced.
The rate increase will mean many of those who have loans with the provider will see the cost of their annual repayments climb by hundreds of euro.
Pepper Advantage blamed the rate increases – which will range from 0.35 to 0.5 per cent – on two distinct interest rate hikes totalling half a point that have been introduced by the European Central Bank (ECB) since June.
A 0.5 percentage point increase in lending rates will add about €30 to the monthly repayments on a €100,000 loan.
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If a person still has €200,000 outstanding on their mortgage, they will have to pay close to €60 more each month from the end of the year.
The hike will be unwelcome news for thousands of borrowers, not least because Pepper already has variable rates that can be considerably higher than fixed rates offered by traditional lenders.
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Many of its customers already struggle to switch to more traditional lenders in search of better value as a result of historic issues with repayments.
When asked the variable rates, a Pepper spokeswoman said the company managed about 130,000 loans, of which about 14,000 were on variable rates.
“These loans sit across multiple portfolios that originated with different lenders and at different points in time. As a result, there is no single ‘Pepper variable rate’ and we don’t have a standard variable rate schedule that applies across all customers."
She said there were “hundreds of different variable rates across the portfolios we manage. The rate applicable to an individual loan depends on a range of factors including the original lender, when the loan was originated and the type of loan involved.”
Across these portfolios, the current average variable rate on principal dwelling home mortgages managed by Pepper Advantage is approximately 5.2 per cent, she said.
She added that some higher rates still existed within legacy portfolios but “they are very rare, applying to fewer than 100 accounts managed by Pepper Advantage Ireland. Most accounts are around the average rate, with some lower.”
She said it was also worth noting that Pepper Advantage Ireland derived no commercial benefit from changes in interest rates on the portfolios it serviced on behalf of beneficial owners.
The rate hike will inevitably put some borrowers whose loans are owned by Pepper under significant financial pressure.
“Since the ECB started modifying interest rates in July 2022, Pepper has continued to make decisions on interest rates on a delayed and incremental basis, in line with its variable interest rates policy,” the company said in a statement.
“Subject to the criteria and any further announcements by the ECB, Pepper Advantage Ireland continues to review the situation for customers, including any customers not affected by the current announcement.
Pepper Advantage is owned by a US private equity firm JC Flowers. It entered the Irish market in 2012 and is best known for servicing mortgages secured by collateral.
It is used by a number of investment funds for Irish loans acquired after the financial crash.
