Pepper Advantage Ireland has identified what it says is an error in its mortgage repayment process which has led to monthly mortgage repayments for approximately 2,500 borrowers being lower than they should be.

However, those customers will now see their monthly bills rise dramatically as multiple interest rates totalling a huge 4.5 percentage points in some cases and dating back to August 2022 are set to be applied at once.

The borrowers are a mix of residential and buy-to-let mortgages whose loans were originated by a mix of banks before being transferred to Pepper, which services around 130,000 Irish mortgages altogether.

Pepper said it had undercharged the customers affected, by telling borrowers their interest rate was going up as the ECB began hiking in the summer of 2022 but not collecting the full new amount. Borrowers will not be charged for the interest that was not billed and Pepper is absorbing that cost.

However, the customers will now be contacted to alert them to the full new rate they’re going to be charged. The Central Bank has been informed of the error, which was discovered late last year.

The mistake means that instead of having interest rates step up over more than a year between August 2022 and last October, when the ECB hit pause on its hikes, some borrowers see that huge rise in borrowing costs all at once.

Pepper said it will write to all of the customers affected in the coming weeks and will offer potential debt deals including, for customers who qualify, a potential shift to a two-year fixed rate of 3pc.

Depending on which fund owns their mortgage, the interest rate on loans serviced by Pepper can vary hugely. At the top end some borrowers are facing rates as high as 9pc – double the going rate from traditional banks.

Pepper Advantage Ireland services tens of thousands of Irish mortgages mostly on behalf of vulture funds and other financial investors that bought them from banks in the wake of the financial crisis.

The loans affected by the newly identified error are tracker and variable-rate customers. They were previously notified about interest rate increases following changes in the European Central Bank rate but their subsequent monthly mortgage repayments did not increase, in some cases from as early as August 2022.

“Pepper Advantage Ireland is working to rectify this error and the company will not seek to recover the interest amounts not collected. The accounts for the affected customers will be amended as if the error did not happen,” a spokesman said.

Pepper said it will writing to all customers impacted by this error over the coming weeks. Customer letters will include information regarding the options available for future mortgage repayments, which will now reflect the recent increases in the ECB rate.

No payments will change for at least 60 days to provide borrowers with time to work with Pepper Advantage Ireland to find an appropriate payment plan, the company said.

That’s in recognition that previous increases in interest rates will now end up being implemented at once for those affected.

“Pepper Advantage Ireland fully understands and acknowledges the error and the challenges and concern it may create for customers. We apologise for this error and want to reassure customers that we are taking the necessary steps to support all affected borrowers,” a spokesman said.

A spokeswoman for the Central Bank of Ireland sad the regulator has been engaging with Pepper in relation to the issue.

“The Central Bank’s priority has been to ensure that Pepper put in place an effective, consumer focused plan to support all affected customers. This includes providing additional supports for customers who may have difficulty in meeting repayments,” the Central Bank said in a statement.

Any customer who considers that they have been affected by this error or has any concerns, should contact Pepper Advantage directly on 0818 818 181 or visit, the Central Bank said.

Source: Irish Independent, 09/02/2024.

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