New lending guidelines issued by the financial regulator will force first-time buyers to take out expensive mortgages where the interest rate is fixed for five years, according to the Independent Mortgage Advisers Federation (Imaf).

Because lenders do not have to "stress test" these mortgages, first-time buyers can qualify for mortgages that are up to €80,000 higher if they agree to fix the interest rate they are paying for five years, Imaf president Michael Dowling said.

"Our concern is that first-time buyers are taking out five-year fixes not out of choice, but out of necessity," he said.

Five-year fixed rates average at about 5.5 per cent, which is more expensive than the average interest rate on "tracker" mortgages, where first-time buyers currently pay a typical rate of 5.1 per cent.

Although some first-time buyers like the security of knowing that their repayments will not increase in line with hikes in the European Central Bank (ECB) interest rate, the current cycle of ECB rate increases is expected to peak later this year, with some economists predicting that it has already done so.

Borrowers face early repayment penalties if they break the terms of the five-year agreement by repaying their loans early or switching to another lender.

The stress testing of mortgages, where lenders check to see if mortgage applicants can still afford their repayments should interest rates rise, is currently a voluntary practice among lenders. Some lenders have already abandoned stress testing for longer-term fixes, reasoning that borrowers won't have to cope with fluctuations in ECB rate increases.

But new stress testing guidelines that come into effect in September are likely to increase the number of buyers who find they must accept a five-year fixed rate mortgage in order to borrow the sum of money they need to afford a property, Mr Dowling said. This is because the guidelines do not apply to five-year fixed rates.

The regulator's new guidelines will give some lenders the go-ahead to approve higher variable rate mortgages to borrowers than they do now, however.

Under the existing system, most lenders check to see if borrowers can still afford to repay mortgages should interest rates rise by 2 per cent above the lender's own standard variable rate.

But as competition in the market intensified and interest rates rose, a variety of different stress tests has emerged, and some are less stringent in checking borrowers' future ability to repay.

Following a review, the financial regulator has now decided that lenders should stress test loans at a margin of 2.75 per cent above the ECB base rate instead.

Under the existing system, a lender with a standard variable rate of 5.15 per cent stress tests the loan to see if the borrower can make their repayments if rates rise to 7.15 per cent. But under the new guidelines, the lender can stress test the loan at a rate of 6.75 per cent, or 2.75 per cent above the current ECB rate of 4 per cent. This could result in higher loan approvals.