‘Mortgage prisoners’ at risk amid soaring interest rates, committee hears

The Central Bank has “failed miserably” to protect “mortgage prisoners” who cannot switch their loans away from so-called vulture funds, the Oireachtas Finance Committee heard on Wednesday.

David Hall, co-founder of the Irish Mortgage Holders Organisation (IMHO), told the committee that vulture funds – the credit firms that purchased debts from mainstream banks in the wake of the financial crisis – “continue to torture” those in mortgage arrears.

“Irish financial mortgage customers have less rights and representation than badgers and many animals in the country. Many mortgage customers are now mortgage prisoners, not being able to get fair mortgages, fair interest rates,” Mr Hall said.

“They have no control, no option of moving, no option of fixed-rate mortgages, having been sold involuntarily to vulture funds.”

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More than 21,000 customers in long-term mortgage arrears are on the books of vulture funds, risking a high rate of repossessions – including “silent repossessions”, or voluntary surrenders.

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The IMHO, a registered charity that advocates on behalf of people in debt, is now seeing significant numbers of people who are working, but struggling with repayments and anticipate going into arrears. This is often known as “pre-arrears”. Many of these people are now being “fleeced” by vulture funds as interest rates increase, Mr Hall said.

The organisation, which argues that giving further powers to the Central Bank to protect consumers would be “a waste of time”, has called for the establishment of an independent financial consumer office.

[ Pepper to hike some mortgages to 8% ]

Also addressing the committee, financial adviser Padraic Kissane said many borrowers had become “bank-locked”. He predicted that this word would become prevalent in future.

“Most of these firms now only charge variable rates and do not give a fixed rate option and this causes a problem in terms of certainty and security for the loanee especially as variable rates are going up and up,” he said.

Meanwhile, Brendan Burgess of consumer forum Askaboutmoney.com said borrowers should not be “gouged”, whether they were in arrears or not.

“The principle of fairness is terribly important here,” he said, calling for borrowers whose loans were sold by a bank to a vulture fund to be offered the same rates as those that are available at the originating bank.