Mortgage holders have been warned against accepting interest-only mortgages or mortgage moratoriums from their lender.
Taking up these options means homeowners "will be driven into deeper debt", said chairman of the Debt Management Association of Ireland (DMAI) Eugene McDarby.
"Irish lenders are urging hard-pressed consumers to consider interest-only mortgages as a solution to free up cash to pay other debts.
"It misleads the homeowner into believing that by accepting lower repayments to free up cash that it takes the pressure off - but it doesn’t.
"In fact it means that the average mortgage holder with, say, a debt of €300k will be adding an estimated €17k over a two year period increasing the debt substantially."
McDarby said he found it "astonishing" that lenders are offering interest-only options instead of "taking a more responsible approach to offering an attractive capital repayment scheme instead...They ought to be taken to task over this and, once and for all, come clean as to why they are doing this!”
Example (from the DMAI):
€300,000 over 30-year term at 4%:
Annuity Repayment: €1,432.25 per month
If in year five, the client took a six-month payment break, and on completion of the payment break, to maintain the repayments at the previous level of €1,432.25, the term would have to be extended by two years, costing in excess of €17,000 in additional interest.