Thousands of homeowners whose mortgages have been sold to vulture funds have no option but to fix their lending rates before European interest rates are expected to rise.
That mortgage holder is stuck on variable rates and high-margin trackers, and is now facing thousands of euros in higher repayments over the coming months.
The European Central Bank (ECB) is set to launch a round of interest rate hikes from next month, with its key refinancing rate likely to rise by 0.75 percentage points by the end of the year.
This would add approximately €1,000 to the annual cost of repayment on a typical variable or tracker mortgage.
A large number of people whose pledges have been sold to vulture funds now find themselves trapped on mortgage rates that are determined to be very expensive.
This is because vulture funds and credit-servicing firms that administer purchased mortgages do not offer fixed rates because they are not active in the lending market.
Consumer advocate Brendan Burgess says most mortgage holders whose loans were sold by banks are unable to move from vultures to active lenders for a variety of reasons.
Many people cannot switch because they are in arrears and have a poor credit record. Others can’t switch because they recently changed jobs, or the spouse has left working outside the home which reduces household income.
Switching applications may also be declined because the balance on the mortgage is too low, or the home has asbestos or fire-safety issues.
Over the years, thousands of demonstrative and non-performing mortgage funds have been sold. They are serviced by the likes of Pepper, Start, Lapithus, Cabot, Link Group and Mars Capital.
These mortgages are often owned by separate investment funds. For example, Goldman Sachs is the ultimate owner of some of the hostages serviced by Pepper.
Sold mortgages include performing and non-performing loans, and are tracked and at variable rates. About 85,000 family home mortgages have been sold by mainstream banks in recent years.
The vultures that eventually take the mortgage and the firms that provide them service for the vultures do not operate as active lenders, so they will not offer fixed rates.
A recent report by the Central Bank estimated that 54 percent of the accounts sold to vultures are in long-term mortgage arrears.
Mr Burgess said: “The big argument about mortgages sold to Vulture Funds was that your rights were protected, but your options to recover are limited or non-existent.”
He said that at present all the fixed rates in the market are lower than the variable rates.
“Those whose pledge was sold to the Vulture Fund are trapped. They can’t heal, so they have no certainty about where they will be in three or five months from now.”
Homeowners on variables, high-margin trackers and those on the receiving end of the fix, whose mortgages haven’t sold, are rushing to fix this at the moment.
The paper, which pledges 60,000 residential on behalf of Vultures, said it does not offer fixed rates.
Attempts to contact Start Mortgage were unsuccessful. There was no comment from Cabot.
