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We face new loans bill

DEBT analysts have warned that the taxpayer may be forced to foot part of the bill for the increase in mortgage rates.

Yesterday, AIB signalled their intention to follow their competitors and increase the rate of mortgages as it revealed the biggest losses in its history.

The bank, which said it made record losses of €2bn for the first half of this year, said it had no choice but to follow its rival Bank of Ireland by hiking rates on variable mortgages.

However, Eugene McDarby, chairman of the Debt Management Association of Ireland (DMAI), said over-indebted individuals unable to afford the increase on their variable mortgages may be forced to avail of the mortgage interest supplement scheme run by the Department of Social Welfare.

"The banks need to ring-fence customers who are already in arrears, or that are already in difficulty on their mortgages," he said.

"There is no point in the banks increasing rates on these individuals, who cannot afford to pay at the moment. It will only increase the stress for what is already a very stressful situation for these people."

Almost 300,000 people have standard variable rates and lenders can put up standard variable rates at will. Mr McDarby urged banks to consider accepting capital-only payments and waive the interest payment for an agreed period with the consumer in light of the economic climate.