Banks and building societies catch homeowners in an interest trap by charging them more on their borrowings than they will ever pay on savings. As a result, it makes perfect financial sense for homeowners with large amounts of cash to spare to pay a lump sum off their mortgage capital borrowings every now and again.

With the arrival of current account mortgages on the Irish market earlier this week, homeowners will no longer have to take active steps to avoid such an interest trap: it will all happen automatically.

Under First Active's current account mortgage, introduced last Tuesday, money in a homeowner's current account reduces the balance of the mortgage. Interest is calculated on a daily basis, so the customer benefits immediately from the crediting of money to the account.

For example, a customer who has a mortgage of €200,000 may have their monthly salary of €3,000 paid directly into their account, and interest for that day is only payable on €197,000.

In the case of joint homeowners and double-income households, the chance to create a significant dent in the mortgage principal once a month (or two healthy-sized dents twice a month) could be a fairly straightforward method of reducing the overall mortgage interest payable.

As homeowners withdraw money from the account over the course of the month to pay for day-to-day expenses such as groceries, transport costs and leisure activities, and as household bills are debited from the count, the amount owed on the mortgage will steadily creep back up to the original principal, minus the normal monthly repayment - which will be set in the same way as a usual repayment mortgage.

If homeowners' spend less than they have earned, this surplus in their day-to-day account will reduce the balance of their mortgage automatically. Those savings are classed as overpayments and are available at any time.

Customers who consistently spend less than they earn could find a current account mortgage makes it easier to overpay and shorten the life of their mortgage.

To see how much can be saved on interest, First Active has provided a current account mortgage calculator on its website at www.firstactive.ie. Homeowners will need to decide if these savings outweigh the benefit of opting for lenders with more competitive standard variable rates of interest such as Bank of Scotland and AIB.

First Active's launch follows the introduction of a number of high-profile products that make it easier for people to access equity tied up in their homes, such as Permanent TSB's mortgage chequebook account and EBS's Family First.

Some believe that, by making the process easier and less time-consuming, lenders are discouraging people from reducing their mortgages over time, leading to a situation where mortgages remain topped-up throughout homeowners' working lives.

The First Active current account mortgage is not an equity-release product as such, in so far as it does not specifically encourage homeowners to take out top-up loans of thousands of euros to pay for home improvements, holidays or deposits for grown-up children's first steps up the property ladder. Instead it has been marketed as a way to promote early repayment. The opportunity to release equity is "really a secondary benefit", according to Mr Brendan O'Hora, marketing manager for First Active.

But like all current accounts, this product does have an overdraft facility. Where a customer has been approved upfront for an amount over and above what they need, they can access these funds at the same variable mortgage rate and only pay interest on a daily basis over the time that these funds are used. Customers who take out overdrafts on normal, no-frills current accounts are typically charged a rate of 11 to 12 per cent, Mr O'Hora notes.

First Active's mortgage product is one step on from Permanent TSB's chequebook mortgage One Plan, which gives customers pre-approval to borrow up to 75 per cent of the value of their homes. This equity can be accessed by simply writing cheques for goods or services.

First Active develops the chequebook concept further by making small amounts of equity - in the form of cheap, pre-approved overdrafts - accessible through ATMs. From July 2003, customers will be able to do Laser card transactions from the account.

Although the amount pre-approved on each occasion is likely to be low, in the region of €500 or €1,000, the overdraft facility means current account mortgage holders are still borrowing against their own home whenever their household budget goes awry, rather than keeping occasional dips into the red in a completely separate account where there is no question that their home could be at risk.

If customers repeat the overdraft process a number of times, could they find that the amount owed on a mortgage spirals up rather than down? No, says Mr O'Hora, because their next salary lodgment will automatically pay off the overdraft.

"Under no circumstances will we be encouraging customers to take out overdrafts," adds Mr O'Hora. "Our experience is that they're very clued in. They will not use equity in their house unless there's a good reason," he says.

Current account mortgages give homeowners more control over the size of their repayments and make the term of the mortgage more fluid. This can be either an advantage or a disadvantage, depending on their self-control.

As Dr Liam O'Reilly, chief executive of the soon-to-be established Irish Financial Services Regulatory Authority (IFSRA) said last week, "consumers are entitled to make their own mistakes".