About 7,000 mortgage customers are paying interests rate of between 8.5 per cent and 10 per cent, a research paper has found.
The Oireachtas Library and Research Service paper found that 1 per cent, or 7,000, of all private dwelling mortgages were at interest rates as high as 10 per cent. All were customers of non-bank non-lenders (NBNLs).
Similarly, one in eight of all mortgage holders, or about 100,000 customers, are paying interest at 6 per cent or more. Their loans are predominantly held by vulture funds.
The data, provided by the Central Bank of Ireland, shows that interest rates for bank customers are much lower. Half are paying interest of 4 per cent or less, and 38 per cent pay between 4 per cent to 6 per cent.
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The paper by Barry Creighton, a senior researcher in economics, outlines how retail credit firms have grown to have a 16 per cent share of the Irish market. Most non-performing loans previously on the books of commercial banks have been transferred to these companies.
The research tracked how the number of customers paying mortgage interest of 6 per cent and above has increased since the European Central Bank began a series of increases in interest rates from July 2022 onwards.
In June 2022, there were no mortgages at interest rates of 6 per cent or more. By March 2023, 7 per cent of mortgages were in this bracket. This increased to 13 per cent by last June.
“NBNL [non-bank non-lender] mortgage customers are generally paying higher interest rates than mortgage customers of banks and non-banks. Unfortunately, they tend to be unable to switch their mortgage to an alternative provider,” the report said.
“This is largely because traditional banks are unable, for regulatory and commercial reasons, to accept customers who have previously had their mortgage be deemed to be an NPL [non-performing loan].”
Sinn Féin spokesman on Finance Pearse Doherty said 100,000 people, whose mortgages were held by vulture funds, found themselves unable to switch and were stuck with paying mortgage interest of 6 per cent or more.
“These people are mortgage prisoners. When the banks sold their loans to vulture funds, people were told by the then [government] they would be no worse off,” he said.
“What this paper shows very clearly is that 7,000 customers are paying 8.5 per cent or more. Nearly all people with loans from vulture funds are paying interest of between 6 to 8 per cent. It is extortionate. There should be a responsibility on the originating bank to buy back the loans.”
Very few bank customers were paying interest rates above 4.7 per cent, he said.
