A "middle-class mortgage time bomb" is ticking that will force the banks to write off billions of euro from their home-loan books, mortgage brokers and debt counselors surveyed in affluent areas of Dublin have warned.


The €150bn the Dublin banks have loaned to home owners will not sour as quickly as the smaller €88bn the lenders advanced to property developers, government officials and the banks hope. But Gerry Dowling, coordinator of the Money Advice and Budgeting Service (Mabs) in Dundrum and Rathfarnham, said that the majority of clients in the middle-class districts now have debt issues linked to borrowers failing to meet monthly mortgage payments. Their arrears were triggered by unemployment or even a small cut in household income.


"My own experience is that now 60% of cases in Dundrum are about issues to do with mortgage debts," said Dowling.


"Ultimately, there will be a big problem the banks will have to face."


And warning of a middle-class mortgage time tomb, the Independent Mortgage Advisers Federation (IMAF) said the mortgage banks faced increased losses because their official policy of negotiating with borrowers to defer mortgage payments was masking an inevitable increase in arrears and write-offs.


"The big problem is what is going to happen when the softly-softly approach of the banks ends," said IMAF's senior spokesman Michael Dowling. "If you are struggling to pay because of reduced income, your arrears are just going to build," he predicted. IMAF said a significant chunk of its advisers' time was now spent renegotiating on behalf of troubled borrowers with mortgage lenders, not in selling new mortgages.


Dowling said the banks were for the time being taking a "reasonable" approach, but that big trouble was being stored up for the lenders. The brokers say at least 20% of their clients are facing some sort of difficulty with their mortgage payments. He said the banks needed to publish the numbers of mortgage payers that had recently switched to interest-only payments – indicating a sign of stress.


Flac, an organisation that runs a network of 70 Free Legal Aid Centres, said its daily telephone logbook recording requests for referrals to solicitors and barristers on debt issues increasingly featured desperate queries from mortgage holders. Over recent months, about a 10th of all the enquiries received by Flac involved urgent queries on mortgage debt.


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