The Central Bank faced strong criticism from some TDs at the Oireachtas Finance Committee yesterday over the higher mortgage rates being paid by customers whose loans were sold to investment funds.
Some people are being charged rates as high as 7%.
Financial adviser Padraic Kissane explained that there was a level of non-performing loans in the Irish banks.
After the economic crash back in 2009, a directive was issued by the European Central Bank to the Central Bank here to get the main lenders to lower their levels of non-performing loans and to do that they sold off some mortgage portfolios.
Speaking on RTÉ's Morning Ireland, Mr Kissane said these loans "were deemed as bad loans and every entity that was in that marketplace, which are generally investment funds, came in and bought them up and appointed credit servicing firms to look after those accounts".
He said that as a result, a lot of them only charged variable rates.
He said those variable rates increased substantially to reach unsustainable levels for a lot of these people, who were paying arrangements that were agreed, based on their set of circumstances, and who are now challenged hugely by rates of 7%.
"And that only is before predicted further increases that are coming from the ECB, so it is causing a lot of issues," he added.
He said the Central Bank is engaging with the credit servicing firm but their powers are limited in what they can do, which is "of cold comfort to the customers that are certainly experiencing difficulties".
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Mr Kissane said that most of these would be people are "trying their level best" and a lot of them would be in arrangements that would have had affordability assessed.
He said there was a debate on what is classified as a non-performing loan in this aspect as well.
"I know for certain some banks deemed some of these accounts as performing loans because they were agreed repayment arrangements and some of the money would have been warehoused," he said.
However, he added that the difficulty is that these people have no other options for lenders.
"They are locked essentially with the firm that they're with, and that's creating an easy position for people to increase interest rates, but I don't see the sense in continuing to increase interest rates on a sector that was already under difficulty when interest rates were lower," he stated.
"Longer term it makes no sense because it's going to create difficulty in terms of the affordability, and I would encourage anybody that is in difficulty to contact the credit servicing firms and look at their arrangements now," he added.
He warned that the situation "will reach a critical stage" and further increases will be passed on, but the mainstream banks that had to move out these non-performing loans are going to start to see with increasing interest rates another set of non-performing loans arriving on their books.