AROUND 100,000 mortgages sold to vulture funds are now being hit by some of the highest mortgage rate hikes in the country.
Borrowers must pay interest as high as 7pc while being denied the option to lock in to lower fixed rates.
Consumer advocate Brendan Burgess accused the Central Bank of “throwing these people to the wolves” and said people whose loans were sold were now “mortgage prisoners”.
One couple told the Irish Independent they feel at the mercy of vultures and were never in arrears. “We did everything to keep payments on our home with three young kids,” they said.
Some borrowers whose loans were sold have been told their mortgage rates are going as high as 7.09pc, prompting fears of a massive spike in arrears. One borrower says his monthly repayments have gone from around €200 a month to €700 a month.
Rates as high as 7pc have not been seen for years and are a multiple of the European Central Bank rate.
The holders of mortgages sold to vultures are not being given the option to fix their rates. They are instead on variable rates that have gone up numerous times this year, by far in excess of ECB rate rises.
There have been repeated calls in the past for vultures that have bought mortgages to be regulated.
The loans are serviced by the likes of Start and Pepper, which are regulated, but decisions on rates are made by the unregulated vultures that own the loans.
Borrowers whose loans were sold were repeatedly told by the Central Bank and the Department of Finance that they would retain the original mortgage terms and conditions.
This led many to assume they would continue to have the option of signing up for fixed rates, and would retain more attractive rates such as managed loan-to-value rates they had with their original lender.
But now they are being hit with a succession of mortgage rate rises, with more to come because the European Central Bank (ECB) is due to announce another 0.5 percentage point rise next week.
A letter seen by the Irish Independent sent by Start Mortgages informs a mortgage borrower that the rate is going to 7.09pc in January. “Start Mortgages does not offer new lending products,” the letter adds, explaining why no fixed rate option is being offered.
Not all of those whose mortgages are serviced by Start are on such high rates. Some Pepper variables have gone as high as 6.5pc.
Consumer advocate Brendan Burgess said there was no justification for charging such high rates.
Many of the mortgages that were sold had split arrangements, because they were struggling to meet full payments. This is where a portion of the loan is set aside to be paid later.
The borrowers say they were told by their original lenders these loans were not regarded as non-performing.
Mr Burgess said people whose loans were sold are “mortgage prisoners”.
He claimed the Central Bank forced the main lenders to sell any loans where full payments were not being made, including split mortgages.
“I was appalled at the time when the Central Bank forced Permanent TSB to sell perfectly good split mortgages to Pepper.
“The Central Bank just completely ignored the interest of the borrowers involved.
“Those customers are now paying 6.5pc and higher, when they could have fixed with PTSB at 3pc,” Mr Burgess said.
Many of the borrowers whose loans are owned by vultures are now going to be catapulted into arrears “directly as a result of the Central Bank’s action,” he said in a letter to the Central Bank governor Gabriel Makhlouf.
Mr Burgess told him: “The Central Bank really needs to take action immediately on this. “You caused the problem unnecessarily. Now you should fix it.”
Pepper said it did not offer fixed rates for those whose mortgages it services because it did operate as a lender or originator, but as a loan servicer.
“A key option for people is to refinance with a different lender, which they encourage if people think they can get a lower rate,” it said.
The Central Bank did not respond when asked whether the borrowers whose loans were sold had been misled.
It did say that it could not comment on its supervisory engagement with any individual firm.