Welcome for Pepper mortgage move

The confirmation from Pepper, an Australian mortgage lender based in Shannon, Co Clare, that it will sell home loans directly, has been welcomed by a leading expert as it boosts hopes that new entrants will shake up the market.

Michael Dowling, chairman of the mortgage committee at the Irish Brokers’ Association, said Pepper’s plans to extend selling home loans beyond its existing exclusive arrangement with brokers will help bring some new competition to the margins of the market here. Pepper said it will take applications online or by phone.

The arrival of new competitors to loosen the grip of AIB, Bank of Ireland, and Permanent TSB on the market has long been anticipated by mortgage brokers, consumer campaigners, and regulators.

Mr Dowling said that Pepper is the best in its class with its headline standard variable rate of 3.1% for loan-to-value mortgages of up to 50%, but is “mid-table” behind AIB and KBC Bank, which offer the cheapest variable loans at 90% of loan-to-value mortgages.

Though targeting the self-employed, “one negative is that [Pepper] do charge an arrangement fee and they have no fixed rates”, said Mr Dowling.

Mr Dowling said speculation continues that another new entrant, Frank Money, is “close to coming to market”, a move which could potentially shake up the mortgage sector.

Separately, Central Bank deputy governor Cyril Roux, said yesterday that mortgage controls are best decided at a national level.

Mr Roux was speaking at a public hearing at the European Commission. Many observers believe that the Central Bank will keep the mortgage lending regime broadly intact when it announces its first review of the controls.

This follows the decision of Finance Minister Michael Noonan for new tax incentives for first-time buyers to buy new built homes, which are designed to spur builders to buy new homes.

Central Bank research, published yesterday, shows that lenders here advanced very few loans allowed under exemptions to mortgage lending controls for negative equity, switcher, and restructuring loans.

A separate Central Bank report showed that Irish default rates on mortgages, though declining, remain among the highest in Europe, while mortgage rates are among the highest.

Meanwhile, the Institute of Professional Auctioneers and Valuers said yesterday that arrears for buy-to-let mortgages will “escalate” as a large number of interest-only home loans expire. 

It warns this will reduce further the number of rental properties.


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