Permanent TSB, which caused a public firestorm after hiking interest rates for variable mortgage holders last week, will become a so-called "zombie" mortgage lender because it does not want to attract new business, a major mortgage selling group has claimed.

"I am led to believe that it does not have money to lend at the moment," said Michael Dowling of the Irish Mortgage Adviser Federation (IMAF).

"The interest rates they are charging says to customers to go elsewhere. A bank that does that is a zombie bank."

Rejecting IMAF's claims, Permanent TSB said it remained "very competitive" with many of its mortgage rivals and was "very much open for business". A spokesman for Permanent TSB said it was charging rates that it needed to charge to limit losses it was making in the market.

Dowling warned that Irish residential loan books may have to be included in the Nama process some time in time in the future because of rising unemployment.

However, official sources said the Irish banks' €150bn residential loan books remain in good shape and were not included in Nama in order to limit the exposure of taxpayers to even more potential liabilities.