Michael Noonan of the ruling centre-right Fine Gael party, told RTE Radio One the banks’ reluctance to face up to the consequences of arrears had gone on too long.

He said: “This has to be dealt with in the interests of the people who are in debt, because they can’t manage their full mortgage repayments. But also in the interests of the country.

“You can’t have a hundred thousand families in a small country, not participating in the growth of the economy. And they can’t participate if they’re burdened with debt.”

He said levels of repossessions were low compared to other countries, but when repossessions came the emphasis should be on the buy-to-let sector: “People made commercial investments, they’re collecting rent, they should pay the interest on their mortgages, and if they can’t, the investment should be sold.

“And people who can pay the investment should own the property.”

Earlier this month, Irish Central Bank figures revealed the pace of growth in mortgage arrears was slowing but roughly 23,500 mortgages had not been paid for two or more years. Almost 12% of private residential mortgages were three months behind in payments at the end of December.