But financial advisers warn that interest-only is a risky gamble that could lead to borrowers being forced to sell their homes unless they have alternative plans for paying back the capital sum when the mortgage ends.

Interest-only looks cheap on paper because the monthly repayment covers only the interest paid to the lender and nothing goes towards repaying the actual amount borrowed. It is increasingly attractive in the short term following three interest rate hikes in the past seven months, but, for many borrowers, interest-only is a false economy that could cost them thousands of euro in extra interest in the long run.

Permanent TSB revised its rules on Monday, allowing first-time buyers and other customers borrow up to 92% of the value of their homes on an interest-only basis. Ulster Bank made a similar move at the start of May and IIB Homeloans has been giving 95% mortgages on an interest-only basis since last November.

Bank of Scotland (Ireland) is even more aggressive, doing 100% mortgages with interest-only repayments. It also allows home owners remain on interestonly for the full term of the mortgage, though not if they have borrowed 100%.

Following recent interest hikes, the payments on a typical 300,000 mortgage have grown to 1,625 a month. This could be cut to 1,060 by switching to interest-only, a saving of 565 a month.

However, the borrower would pay more than 130,000 in extra interest over the 25-year term so long as none of the original 300,000 is repaid.

Mortgage experts warn that these loans need to be handled with care.

"Interest-only mortgages on the family home should only be seen as a very short-term way of coping when cash is tight, " said Liam Ferguson of mortgage broker Ferguson & Associates.

"Staying on interest-only payments means paying more interest because the amount you owe is not decreasing.

And if you've got a big mortgage, you're leaving yourself very exposed to any correction in property values."

Peter Bastable, managing director of Simply Mortgages, said interest-only is increasingly popular with well-heeled professionals with mortgages of more than 500,000.

"We're seeing it for bigger mortgages where people have a way out at the end of the day, maybe by selling a business or investment property to pay off the loan, " he said.

But Bastable warned that interestonly is not for everybody. "It would be a worrying trend if people are going interest-only just to keep down the repayments and raises questions about whether they should be borrowing so much in the first place, " he said.

According to the lenders, interestonly cannot be used as a backdoor to a bigger mortgage. They insist that normal credit rules apply when deciding how much to lend to interest-only borrowers.

The Financial Regulator has warned that home owners risk being left with mortgage shortfalls when they borrow interest-only, even if they have a separate savings policies in place to pay back the debt.

"There is no guarantee that either selling your property or using the proceeds of your policy will create enough money to pay off your original mortgage, " it states.