Article: Pepper increasing standard variable rates by 1.25% (to avg of ~5.45%)

Pepper Finance, the mortgage service provider, is imposing a 1.25 percentage point increase on thousands of standard variable rate (SVR) mortgage holders from the end of next month.

The rise will bring the average rate on SVR loans serviced by Pepper to close to 5.45

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Pepper services a total of 60,000 mortgages, owned by investment funds such as Carval, Goldman Sachs and Pimco[...]Standard variable rate loans are believed to account for a sizeable minority of the total book.

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The rise in the standard variable rate will not affect Pepper customers who make repayments under an agreed restructuring arrangement.

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The increase will not take effect before October 20 but will affect owner-occupier, buy-to-let and SME customers.

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So much for the Minister for Finance's assurance that no one's legal position is changed by their sale to a vulture fund.

I have always argued that while this is legally correct, in practice, the lenders can charge what they like and Pepper is not looking for new business so they don't care what the market thinks of them.

I feel particularly sorry for the ptsb customers who had performing split mortgages and the Central Bank forced ptsb to classify them as non-performing and to sell them. But they will be cushioned to some extent by having no interest being charged on the warehoused portion.

Brendan

ECB rates have gone up 1.25%. Is it expected that mortgage interest rates would go up accordingly? It is a massive hike in one go mind.

By coincidence, Dominic Coyle has a Q&A piece from a borrower who is about to be hit with this rate increase:

But he seems to be misunderstanding/wrongly assuming a few points about the borrower's situation.

And then he says that Bank of Ireland has the lowest fixed rate in the market. While that is technically true, it takes no account of the fact that BOI customers coming off a fixed rate face very high rates – since BOI discriminates between new and existing customers.

Brendan Burgess said:

So much for the Minister for Finance's assurance that no one's legal position is changed by their sale to a vulture fund.

I have always argued that while this is legally correct, in practice, the lenders can charge what they like and Pepper is not looking for new business so they don't care what the market thinks of them.

I feel particularly sorry for the ptsb customers who had performing split mortgages and the Central Bank forced ptsb to classify them as non-performing and to sell them. But they will be cushioned to some extent by having no interest being charged on the warehoused portion.

Brendan

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Hi Brendan,
Quick question, hope you can advise.
We have a split mortgage with Pepper (about 50/50 split) 3.65% on the serviced mortgage (this rate has never changed since the loan moved over in 2013) and 0% on the warehoused mortgage.
I called them about 6 months ago inquiring what options were available, moving to a fixed rate etc...
I was told that there where no options and that my rate & repayments would never change and it was more or less a fixed rate.
I took this as read, so I was surprised to get a letter in saying our rate was increasing from 3.65 to to 4.9.
Is it worth calling them and querying this or legally would I be wasting my time?

Cheers Brendan,

@markymark The Times article in the first post says:

The rise in the standard variable rate will not affect Pepper customers who make repayments under an agreed restructuring arrangement.

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Are you making repayments under an agreed restructuring arrangement?

markymark said:

We have a split mortgage with Pepper (about 50/50 split) 3.65% on the serviced mortgage

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markymark said:

increasing from 3.65 to to 4.9.

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Even if that increase holds, you are on a very good deal. Your average rate on the whole mortgage is 2.45%

@markymark

I believe that both you and the Sunday Times misunderstood what you were told.

This is what their website says:

I have an agreed Alternative Repayment Arrangement with Pepper, how does this rate increase affect the arrangement?

The terms of any agreed alternative repayment arrangement (ARA) will remain in effect however the interest rate on your loan will increase in line with the ECB rate change. If you are making reduced payments as part of the ARA your loan repayments will remain the same until the end of the reduced payment period (at which time the new repayment amount will be notified to you at least 30 days before the ARA ends). If you are not making reduced payments, your loan repayment will change following the interest rate increase.

Forget the split mortgage for the moment.
A normal ARA would set the payment at the level the borrower can afford. But the interest rate could still increase. The repayment would not change but the amount of interest charged would increase and so the balance on the mortgage would increase.

I am not sure if they consider a split mortgage an ARA.

If they do, then your repayment will remain the same but the amount of interest being charged will increase.
If they don't, then your repayment will increase.

If you can afford the additional repayment, then you should make it as you should be seeking to pay down a 4.9% mortgage as quickly as possible. You certainly should not be allowing unpaid interest to accumulate.

I have attached the FAQ from the Pepper website to this post in case you need it and Pepper has changed it in the meantime.

Brendan