Pepper Homeloans seen spicing up Irish mortgage market

The entry of Pepper Homeloans is good news but will fail to loosen to any significant extent the grip Bank of Ireland and AIB holds over the Irish mortgage market, a leading mortgage expert has said.

Pepper – an Australian finance giant -- becomes the first major new home loans entrant here since the financial crash sent mortgage lending into a tailspin and pushed many home owners deep into negative equity paying mortgages they could no longer afford.

At around €4.5bn, the amount of annual new lending advanced by a shrunken roster of mortgage lenders is now a fraction of the level of loans advanced during the boom years.

Pepper plans to target three types of potential borrowers: To compete in the market with a standard variable rate starting at 3.55% for both home borrowers and buy-to-let investors; to offer access to loans starting at 3.8% for the self-employed, who have long complained about their limited access to mortgage lending since the crash; and to offer borrowers with an impaired credit score access to loans at a rate starting at 4.3%.

“It is positive a new entrant is coming in and it will encourage others to look at the Irish market,” said Michael Dowling, chair of the Irish Brokers’ Association mortgage committee.

“It is known in Australia and has substantial resources. It is putting its toe in the water. It is not going to be seriously competing with Bank of Ireland and AIB, who are the serious players in our market relative to any other player currently, but [Pepper] will be competing on price,” Mr Dowling said.

He said Pepper brings “a little bit of difference” to the existing five prime mortgage lenders in that it will consider applications for its ‘Pepper Advantage’ loan “on a case-by-case basis” for people who may have during the slump had an impaired credit rating but are now meeting their payments.

Mr Dowling said Pepper’s entry would encourage other overseas’ lenders to look again at the Irish mortgage market, but he said people should not get carried with the idea that there were several new lenders in line preparing to enter the market. The extent of the housing slump here, as well as its relative tiny size would likely discourage potential major new entrants for some time, he said.

Pepper already operates in Ireland as a service provider to Danske Bank’s legacy mortgage book, with offices in Shannon in Co Clare and in Dublin.

The asset management arm will be kept separate from its new home loans business. Last summer, Pepper announced plans to recruit 50 staff for its Shannon and Dublin offices with experience in commercial mortgages and real estate. It now employs 400 people here. Pepper will sell its new loans through brokers.

“We’re delighted to be launching what we believe is a modern alternative for lending in Ireland, bringing more competition and choice for Irish borrowers wanting to switch their mortgage, refinance or take out their first home loan,” said Paul Doddrell, chief executive at Pepper in Ireland.

Pepper said that economic conditions here had “improved considerably” and it believed “the time was right” to offer home loans.

Bank of Ireland said yesterday first-time buyers can save up to €80,000 using its new special deposit account and get a bonus of 10% if they then take out a mortgage loan.