The news that Pepper Advantage is increasing its standard variable interest rates by up to half a percentage point next month will come as a bitter blow to around 13,000 borrowers who have their loans managed by the company.
In a news release confirming the hike, Pepper did not say what the new rates would be because, as a spokeswoman subsequently explained to this newspaper, “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”.
What we do know is they will be substantially higher than those available from more traditional lenders. A person with a Pepper-managed loan is likely to be paying at least two percentage points above what is on offer elsewhere. And that makes a huge difference to affordability.
Someone moving from a Pepper variable rate to a fixed rate with one of the more traditional lenders could see their rate fall by 2½ percentage points or more.
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Many Pepper customers – those who saw their loans moved from other banks after they got into financial difficulties during the crash and subsequent years – have been unable to refinance elsewhere because of poor repayment records.
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Being unable to switch and avail of cheaper rates available elsewhere will see someone with a €200,000 outstanding loan at Pepper worse off by around €300 every single month.
That is, by any measure, grossly unfair.
Pepper says it “derives no commercial benefit from changes in interest rates on the portfolios it services on behalf of beneficial owners”. And we have no reason to doubt that but someone, somewhere, is making money out of the misery of a significant number of Irish people, many of whom are still paying a heavy price for the property crash almost 20 years on.
