Home owners with properties in negative equity are being offered new mortgages that allow them to move home.

Bank of Ireland this morning said it would offer negative equity mortgages that would allow customers trade up or down, carrying an amount of negative equity to the mortgage for the new property. The lender joins Ulster Bank in offering such deals.

The move has been cautiously welcomed, but experts said there were some considerations that should be taken into account.

Those customers with tracker mortgages wishing to trade down may be able to hold on to their tracker. However, those wishing to trade up to a new property would lose their loan terms. 

"This is a very significant negative. Trackers are an incredibly valuable commodity and this may mean that from a financial perspective many potential customers will stay put," said Trevor Grant, managing director of MortgageNegotiators.ie. "With Ulster Bank you keep your tracker rate if you move."

Chief executive of the Trusted Advisor Group Paul Sutton said the loss of a tracker mortgage could cost borrowers tens of thousands of euro over the remainder of the mortgage.

"It's important that borrowers considering this option fully understand the long-term value of their tracker contract," he said.

Among other problems facing potential purchasers are the ability to meet the lending criteria, and the income level that would be required to cover the negative equity on some properties.

According to the Central Bank, about 40 per cent of owner-occupiers are in negative equity, with property prices crashing by an estimated 49 per cent throughout the country from their 2007 peak.

Reports from other sources, which take into account cash sales in the market – claim the fall is closer to 60 per cent, as tough credit conditions, an oversupply of housing and weak domestic demand have weigh on the residential property market.

Meanwhile, the number of new mover-purchase home loans has fallen from a peak of €11 billion in 2006 to €900 million last year, according to statistics from the Irish Banking Federation and PricewaterhouseCoopers.

Existing Bank of Ireland customers wishing to avail of the new mortgages will be fully assessed to ensure they can afford the mortgage, the banks said.

"The majority of our customers are not in financial difficulty but some of those who purchased homes, particularly in the last six or seven years, are currently in negative equity," said Jonathan Byrne, Bank of Ireland's head of mortgages in the Republic.

"Whilst this is only a problem for those who want or need to move, some customers may have experienced changes in their lifestyles such as getting married, having children or changing jobs, and now need to move home. Many of these customers can afford the new repayments associated with a new mortgage but the negative equity was previously blocking their move."

Bank of Ireland is also offering customers participating in the mortgage arrears resolution process (MARP) the option to trade down and reduce their mortgages, or carry forward some negative equity.