The weighted average variable mortgage rate charged by Irish so-called non-bank lenders on owner-occupier properties was 4.57 per cent at the end of last year, compared to an average 3.5 per cent charged by mainstream banks, according to data set to be released by the Central Bank on Thursday.
The figures for non-banks span loans acquired by investment firms that bought problem mortgages from big banks in the past decade after the financial crash to lenders such as ICS Mortgages, Finance Ireland and Avant Money. However, the variable rates data would relate mainly to the investment funds, often referred to as vultures.
Non-banks that have entered the mortgage lending market in recent years have focused more on fixed-term rates, where the weighted average rate was 2.23 per cent, according to sources familiar with the figures. That is lower than the 2.69 per cent average fixed-rate charged by Irish banks at the end of last year, they said.
European Central Bank (ECB) tracker rates among non-banks stood at 3.14 per cent at the end of December, lower than the 3.23 per cent average at the banks, they added.
The focus on rates on loans owned by investment funds has sharpened in recent times as it has emerged that some variable rates charged by servicers of such loans are now approaching 8 per cent. Many of the underlying borrowers are unable to refinance at lower rates with mainstream lenders because they are considered higher-risk borrowers.
Pepper Finance, which services about 80,000 Irish mortgages owned by investment funds such as Carval, Goldman Sachs and Pimco, said last month that it was passing on the combined one percentage point of ECB increases from its December and February meetings to most standard variable rate (SVR) borrowers. The average SVR on Pepper-serviced loans is 5.2 per cent, said the company.
Pepper has been increasing rates on variable products since the ECB started hiking official borrowing costs in July, albeit with a lag. The ECB has increased its main lending rate from zero to 3 per cent over the period and is widely expected to hike by a further half a point next week.
