‘Mortgage prisoners’ being forced to pay dearly by vulture funds

Tens of thousands of mortgage holders have become effective “mortgage prisoners” of vulture funds, unable to switch providers and forced to pay sometimes penal interest rates as a result.

New analysis by mortgage brokers moneysherpa, based on recent data released by the Central Bank, indicates that up to almost 60,000 mortgage holders are currently not in a position to move their home loan from one lender to another despite potential savings of thousands of euro on the table for switchers.

Moneysherpa estimate that around 85,000 mortgage holders are currently customers of ‘Vulture Funds’ of which just 26,000 may still be able to switch to lower rates with the rest stuck with their current provider.

The majority of these customers, around 69,000, are currently paying mortgage rates of more than 4 per cent on average and could potentially reduce their repayments significantly if they could switch to another lender.

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This group includes an estimated 38,000 mortgage holders on an average variable rate of 5.57 per cent.

The analysis is based on the latest Central Bank mortgage arrears and January retail interest rate data plus moneysherpa’s own market analysis.

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It identifies three main groups within the ‘vulture funds’ customer base.

There are 26,000 customers who can switch to other lenders, many previously HBOS and Danske bank customers.

The report identifies a further 38,625 customers who can’t switch due to affordability as they cannot meet alternative lenders entry criteria for a new mortgage.

It also points to 20,375 customers who can’t switch due to arrears, the majority of which were previously designated as non-performing loans with the Irish retail banks.

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The founder of the website Mark Coan pointed out that the fact that many of those who are unable to mover mortgage provider as a result of their circumstances have already established affordability as they have been meeting repayments at high interest rates for long periods.

He called on the Government to think “more creatively” about how to manage the issue and support thousands of vulnerable mortgage holders who are exposed to even higher rates in the future.

“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,’ he said.

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“Of these around 38,000 are currently paying rates of 4 per cent plus on average without slipping into mortgage arrears, yet are still unable to switch to lower rates or fix their current rates. Lenders, regulators and governments need to think more creatively about how to support these mortgage holders before they too are forced into arrears,” he continued.

“The other key finding is that there are still 26,000 mortgage holders who could potentially switch to a lower fixed rate, it’s therefore crucial for anyone who is out of arrears for more than 5 years, to double check if they are really a ‘mortgage prisoner’ with an independent mortgage broker and not to assume.”