Pepper to announce entry to mortgage market tomorrow?

Brendan Burgess

Brendan Burgess

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I have heard that Pepper is about to announce that they will be providing mortgages directly.

Apparently it was in today's paper but I haven't seen it anywhere?

They will be doing near-prime and regular mortgages.

I have no idea what rates they will be charging.

Brendan
 
While searching for it, I came across this new entrant into the UK market

https://www.mortgagestrategy.co.uk/self-cert-mortgages-return-as-new-lender-opens/

"
The return of controversial self-certification mortgages has been confirmed with launch of selfcert.co.uk today.

The start-up, backed by private equity investors and based in the Czech Republic, launches with a tracker loan set at 2 per cent above base rate, the Sunday Times reports.

Selfcert.co.uk will lend up to £500,000 at 85 per cent loan-to-value with fees expected to be around £600."

I wonder would they look at the Irish market?
 
I heard on The Last Word last week that sub-prime mortgages were back in the USA.
Plus ça change, plus c'est la même chose
 
This looks like the key bit

upload_2016-1-20_22-15-13.png


So how do these compare?

80% LTV
UB> €250k: 3.35%
KBC :3.45%
AIB: 3.55%
Pepper: 3.55%

So, on rates, they are no better.

90% LTV
Pepper: 3.55%
KBC: 3.65%
AIB: 3.75%

So a bit cheaper for first time buyers.

I don't understand the bit "variable rates from 3.55%". Unless they are 3.55%, with some comfort that they will remain low, I wouldn't see any reason for recommending them.

But there is a fee of 0.5% payable up front, so these are not attractive to borrowers who can get a loan elsewhere. Of course, if everyone else refuses you, and Pepper grants you a loan, that is a different matter.

Brendan
 
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Are there advantages other than rates?

I would imagine that Pepper will have a quicker turnaround.
They allow debt-consolidation which might be useful.

Brendan
 
Black_Adder said:
From 3.55% means that will price on a case by case basis.
Click to expand...

They have 3 different formulations for 3 different types of customer - so where they will get traction is from those who don't meet the strict criteria of current banks, but are well able to pay. (self employed, contract workers etc) and also those who are on horrendous rates and are locked in to their bank because they had payment issues in the past, but are now back to normal earnings but thier bank won't change their rates.

Essential - about midway rates compoared to main lenders.
Essential plus - close to the higher end of standard rates from other banks, but still not highest
Avantage - equal to the higher end of other banks, but not punitive

There is a 0.5% fee too (max €1800) which is paid to the broker.

Overall, a welcome addition to the market.

from their website

Our product suite is designed to help you quickly identify the best solution for your customer:

[broken link removed]
Pepper Essential

Pepper Essential is a product for borrowers seeking a modern alternative for their residential home loan. Our competitive variable rates, personal approach to underwriting and an open dialogue between broker and decision-maker mean that a traditional mortgage is made even easier.

[broken link removed]
Pepper Essential Plus

Pepper Essential Plus is a product that caters to borrowers who may not be able to secure a basic residential home loan through a traditional lender because of their non-standard employment type or income source. Whether your customer is self-employed or has non-standard income, Pepper Homeloans can help.

[broken link removed]
Pepper Advantage

Pepper Advantage is a product that provides greater flexibility for your customers who may have experienced a historic credit event but whose financial affairs are currently up to date. We assess your customer’s financial circumstances on an individual basis and can quickly establish a true picture of their needs and their ability to service a mortgage.
 
Heard on the news this morning about Pepper coming into the Irish market and show they will be "shaking things up". Great, we are moving home and have applied to both AIB and KBC for a new mortgage (which will be less than 50% LTV).

So, by shaking things up, they are offering a rate that's more expensive that the two I mentioned. Great :(
 
I noticed that an "interest and capital repayment" option is available with the Essential and Essential Plus products.

In my opinion, interest-only mortgages can provide a good solution for borrowers with variable incomes, such as sales staff on commission or workers with large irregular bonuses, that want to make capital repayments in a "lumpy" fashion. While inherently risky, they can also make sense for BTL purposes where the borrower intends to sell the property at the end of the loan term to discharge the mortgage. However, these products can quickly turn toxic for borrowers with no credible repayment strategy and I think we have to recognise that they were most commonly taken out by borrowers during the credit bubble to purchase homes they could not otherwise afford.

I hope the Central Bank keeps a close eye on the re-emergence of interest-only mortgages (assuming that is what Pepper are offering). Without diligent loan underwriting, these products can quickly turn into another destabilising time bomb.

I wonder is the 0.5% broker commission paid (directly) by the borrower or Pepper?
 
Deano said:
Heard on the news this morning about Pepper coming into the Irish market and show they will be "shaking things up". Great, we are moving home and have applied to both AIB and KBC for a new mortgage (which will be less than 50% LTV).

So, by shaking things up, they are offering a rate that's more expensive that the two I mentioned. Great :(
Click to expand...

If I was a betting man, I'd say their rates will reduce through 2016.

It would be a bad move for a lender to enter a new market and offer table-topping rates from the get-go. I would expect them to offer SLIGHTLY competitive rates for certain portions of borrowers. This will allow them to take in an initial batch of applications in smaller numbers than if they offered market-leading rates across the board.

As they refine their underwriting process, I expect rates to gradually decrease, in particular for lower LTV's.
 
I was hoping for another Halifax or something.

I'm still paying a ridiculously low rate with BOS ;)
 
Why would Pepper enter the mortgage market and offer rates well below existing rates. To win incremental business all they have to do is offer rates slightly lower than their competitors. o_O

Did Pepper buy any of the distressed mortgage books sold by the banks? Is this an exit strategy from said?
 
Andy836 said:
Did Pepper buy any of the distressed mortgage books sold by the banks? Is this an exit strategy from said?
Click to expand...

They took over management of Danske Bank mortgages, but didn't buy the loan book itself. It's quite likely that they will buy it eventually.
 
Going to focus on the 'Near Prime' market ('Sub Prime' is so 2007) and they are charging a mortgage set up fee which has not been seen in the Irish Mortgage market in about 15 years apparently.
Near Prime being those that can't get mortgages with the main high street Banks. But obviously still complying with the CB rules, obviously!

I'm sure nothing can/will go wrong that will leave the more prudent amongst us picking up the tab again :mad:
 
Delboy said:
I'm sure nothing can/will go wrong that will leave the more prudent amongst us picking up the tab again :mad:
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Hi Delboy

Pepper are not a deposit taker, so if they make bad loans, we won't have to bail out the depositors as we did the last time.

Of course, if the borrowers don't pay their loans, Pepper's other customers may pay higher mortgage rates to make up for the fact that Pepper won't be able to repossess.

Brendan
 
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