Interest rates being charged to people whose mortgages have been bought by vulture funds could go as high as 10pc before the end of the year.

Mortgage rates in double digits were last seen in this country in the 1980s and early 1990s.

Broker Karl Deeter has warned that a two-tier mortgage market has now emerged.

His comments come after the Money Advice and Budgeting Services (Mabs), the State-funded free service for those in debt, warned that thousands of families whose loans were sold to vulture funds would be forced back into arrears unless radical solutions were put in place.

Around 113,000 borrowers who took out their loans years ago with mainstream banks, and who later fell into difficulty, had their mortgages taken over by vulture funds.

Last week, Pepper, which manages thousands of mortgages on behalf of vultures, said its variable rate customers would face a rise of one percentage point due to the two European Central Bank (ECB) rate hikes that came in December and earlier this month.

This will bring some rates as high as 8pc for the some of the 21,000 variable-rate mortgages Pepper services on behalf of vultures. And the ECB is expected to announce at least two more rate rises this year.

Mr Deeter, director of the mortgage broker solution OnlineApplication.com, said this country was headed for a new arrears crisis with mortgage rates last seen 30 years ago.

He said 38,000 mainly older borrowers whose loans were sold to vulture funds following the crash were facing mortgage rates that could rise as high as 10pc before the end of this year.

“These borrowers have become the losers in a two-tier mortgage market that has emerged in Ireland.

“The top tier is made up of the banks and non-bank lenders with younger customers who took out mortgages after the 2008 crash, and older performing loans that were never sold. They are facing interest rate hikes because of the ECB but can mitigate the impact of them by switching bank or fixing their rate.”

The bottom tier is made up of more than 100,000 customers whose mortgages were sold by their banks to private equity funds.

Mr Deeter said: “These mortgage prisoners are becoming the forgotten victims of the 2008 crash.

“Not only are they on the highest interest rates in the market, but they are also unable to change lenders because they are too old or have a previous credit issue or historic mortgage resolution that means other lenders don’t want them.”

However, some older customers may be able to fix their mortgage rate by switching to an equity-release mortgage.

An equity release mortgage normally involves a lender giving the homeowner cash in return for a share in the proceeds of the sale of the property further down the line.

People trying to escape a vulture fund could opt not to take the cash, and treat the equity release product like a conventional mortgage.

Mr Deeter said: “Those aged over 60 may be able to switch to a Spry Finance lifetime loan, which is an equity-release loan, but because it allows optional regular repayments, borrowers can treat it like a regular mortgage if they want to.”

Mr Deeter said people regarded as having non-performing loans, who can’t get approval for a switch to another mortgage lender, should qualify for an equity release product because the criteria applied was also more flexible.

However, interest rates on equity-release loans are high.

He said one customer aged 62 was paying 7.25pc with Pepper and switched to Spry Finance, with a rate fixed at 6.25pc for life.