The Consumers' Association of Ireland has called on the Director of Consumer Affairs to force financial institutions to include compulsory warnings about the additional cost to consumers of taking out 30 to 35year mortgages. The association has suggested that in advertising and at point-of-sale, lenders and intermediaries should be compelled to compare the total cost of the loan of very long-term mortgages against those for a normal 20 year mortgage.

"This would allow consumers to measure, in relative terms, the real price being paid for moderate reductions in monthly costs," according to its spokesman, Mr Eddie Hobbs. As an example, the association states that a £100,000 mortgage over 20 years at the standard rate of interest would cost the consumer a total of £193,000, of which £93,000 is made up of interest. Against this, the same mortgage over 35 years would costs £283,000, with £183,000 in interest. So while the monthly cost of the 35-year mortgage is 16 per cent less than for a 20-year term, the interest bill to the consumer is almost double.

It also urges that consideration be given to additional warnings about the greater exposure to the threat of negative equity, particularly where very long-term mortgages represent 90 per cent of the house purchase price. The association states that consumers need to have their attention focussed on the capital balances outstanding at typical trade-up times for many first-time buyers.

After seven years, for example, it suggests that someone on a 35-year mortgage would only have paid back little more than 5 per cent of the original mortgage, while those on a standard 20 year mortgage would have paid back 20 per cent, giving them considerably more scope for trading up.

It believes lenders should be forced to issue annual reminders to those on lengthy mortgages to accelerate their capital repayments as early as possible, to bring the mortgage down to within a normal 20-year span.