Some Pepper mortgage customers are now facing significant hikes in their interest rates due to an oversight by the financial services firm. Pepper Finance, which manages Irish loan portfolios for various investment entities and banks, has admitted to undercharging approximately 2,500 tracker and variable-rate mortgages. Despite assuring customers that their interest payments would rise alongside European Central Bank (ECB) rate hikes, Pepper failed to adjust billing accurately.
The Australian firm announced on Friday that it would not attempt to recoup the undercharged interest amounts, some dating back to August 2022 when the initial ECB rate hike took effect. However, this decision means affected customers will now experience substantial increases in their monthly repayments as Pepper rectifies what it describes as a processing “error,” essentially passing on 18 months’ worth of interest rate increases in a single adjustment.
To mitigate the impact, Pepper has implemented a 60-day grace period to allow borrowers concerned about affordability to engage with the company and devise suitable payment plans. The error affects a broad spectrum of loans, including residential, commercial, and buy-to-let mortgages, and was only discovered last year.
Pepper intends to reach out to the affected customers, who represent about 2 percent of its total loan book, to inform them of their options. For some tracker mortgage holders, their monthly billing remained static since the ECB’s first rate hike in July 2022. With the ECB’s base rate climbing to 4.5 percent since September of the following year, these customers now face adjustments to reflect the full extent of the rate increases.
Pepper has assured customers that various options will be available to ensure repayments remain manageable. Some customers may even have the opportunity to fix their interest rates at 3 percent over a two-year period.
The Central Bank of Ireland has been collaborating with Pepper to rectify the situation, prioritizing consumer welfare and ensuring that affected customers receive adequate support. Any customers concerned about the impact on their monthly repayments are encouraged to contact Pepper directly for assistance.