Play Vulture funds have passed on to homeowners most of the interest rate rises issued by the European Central Bank. Photo: Getty Images
Vulture funds have passed on to homeowners most of the interest rate rises issued by the European Central Bank. Photo: Getty Images
Thousands more mortgage holders are trapped with vulture funds than previously thought.
Close to 60,000 mortgage holders are now mortgage prisoners of the vultures, a new analysis shows.
The Central Bank estimated recently about 38,000 borrowers are stuck paying sky-high variable rates and were identified at high risk as rates rise.
This is mainly because they have been in arrears in the past. Many are now seen as highly likely to end up in arrears again.
But there are another 20,000 who can’t move away from vu ltures as they have been in arrears in the past.
Vulture funds have passed on most of the European Central Bank ( ECB) rate rises on to them. There have been six ECB rate rises since last summer, but some of those whose mortgages were sold to vulture funds were already on high rates before the loans were sold.
This has led to some paying as high as 9.25pc in variable rates. But a new analysis estimates that thousands of borrowers whose mortgages were sold by mainstream banks to vultures are unable to switch lenders as they can’t meet lenders’ criteria to qualify for a switch. These people have not been in arrears in the past.
The analysis by Mark Coan of money advice and broker site MoneySherpa.ie estimates that close to 60,000 mortgage holders are now mortgage prisoners of the vultures.
About 20,000 can’t switch because they were in arrears in the past and they don’t meet the criteria to qualify for a switch.
Mr Coan has used Central Bank data and MoneySherpa.ie’s own analysis.
Vulture funds won’t offer fixed rates to the mortgage holders whose loans they bought, leaving these borrowers trapped on ever-rising variable rates.
There are main groups of borrowers whose loans were sold to vulture funds.
Around 26,000 mortgage holders can switch to other lenders, and are mostly on trackers. These mortgages were mostly originated by Bank of Scotland (Ireland) and Danske Bank. But there are another 38,625 customer accounts where homeowners can’t switch as they cannot meet the lending criteria of mortgage providers. Interest rates of close to 6pc are being charged to these homeowners.
Another 20,375 customers can’t switch due to arrears.
The majority of these were previously designated as non-performing loans with the Irish retail banks.
Mr Coan said: “Our analysis indicates that there may be almost 60,000 ‘mortgage prisoners’ in Ireland unable to either fix their rate or switch to an alternative lender.”
“Of these, around 38,000 are currently paying rates of 4pc-plus on average without slipping into mortgage arrears, yet are still unable to switch to lower rates or fix their current rates.”
Mr Coan called on lenders, regulators and the Government to think more creatively about how to support these mortgage holders before they, too, are forced into arrears.
“The other key finding is that there are still 26,000 mortgage holders who could potentially switch to a lower fixed rate,” he said. “It’s therefore crucial for anyone who is out of arrears for more than five years, to double check if they are really a ‘mortgage prisoner’ with an independent mortgage broker and not to assume they’re trapped.”
Asked for a comment, the Central Bank said around four out of 10 mortgages are on a fixed rate. But more than half of all mortgage loans continue to be on variable and tracker interest rates.
“While those on tracker rates will have seen an increase matching the ECB rate increases, this is typically from a historically low base. The remaining loan accounts are on non-tracker variable rates,” a spokesperson said.
The Central Bank said that of those on variables, around “38,000 are held by non-banks who do not originate loans and so do not provide a full suite of lending products [such as a generally available fixed rate]”.
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