Thousands of homeowners facing hefty increase in mortgages as Pepper and ICS push up their rates

And ICS Mortgages is to up all its new fixed rates by 0.5pc across all loan-to-value bands from the start of next month.

Its five-year fixed rate for those with a 90pc loan-to-value ratio will be 4.19pc.

This comes after a previous announcement that Dilosk-owned ICS is raising its variable rates by 1.25 percentage points from October 1 for residential customers.

In August, ICS Mortgages said it was capping the size of new home loans at just two-and-a-half times income for the first time.

Broker Michael Dowling said the restrictions meant very few applicants would fulfil the criteria for loan approval.

Pepper, which manages 60,000 mortgages sold to vultures by the banks, has hiked variable rates by 1.25pc.

This has pushed up payments by €140 a month for one borrower spoken to by the Irish Independent.

Pepper said it was reacting after the European Central Bank (ECB) twice increased its key lending rates in the past three months.

Homeowners whose mortgages are managed by Pepper and other loans servicers can’t fix their rates, while many can’t switch to other lenders for a variety of reasons.

The trapped homeowners are now fearing what is expected to be a spate of European interest-rate rises.

Many of the mortgages being serviced by Pepper were sold by Permanent TSB, with a number of these being performing loans.

Over the last few years, thousands of performing and non-performing mortgages have been sold to funds. They are serviced by the likes of Pepper, Start, Lapithus, Cabot, Link Group and Mars Capital.

These mortgages are often owned by separate investment funds. For example, Goldman Sachs is the ultimate owners of some mortgages serviced by Pepper.

Most mortgage holders whose loans were sold by the banks are unable to switch away from the vultures to active lenders for a variety of reasons, says consumer advocate Brendan Burgess.

Many can’t switch because they are in arrears and have a bad credit record. Others can’t switch as they have recently changed jobs, or a husband or wife may have given up work outside the home, lowering the household income.

Switching applications may also be rejected as the loan balance is too low, or the home has mica or fire-safety issues.

Mr Burgess said former Permanent TSB customers sold to Pepper are reporting that their rate has increased from 4.5pc to 5.75pc. If they were still with Permanent TSB they could fix their rates. Pepper does not offer fixed rates.

“When these mortgages were sold to Pepper the Central Bank and the Minister for Finance insisted that the legal rights of the customer would not be affected,” he said.

“While this is technically correct, in practice, these lenders can charge what they want, whereas active lenders like PTSB are subject to market pressure to keep their rates in line.”

Pepper said the changes will not take effect before October 20. Pepper said the 1.25 percentage point rate-rise is equivalent to the total increase in the ECB rate increase which is being passed on.

It will apply to certain residential, buy-to-let, and SME customers on variable rates, serviced by Pepper and where Pepper holds legal title to the mortgage. Some of the loans had a higher-risk profile when originally underwritten and are on rates reflecting that, Pepper said.