Minister for Finance Michael Noonan has insisted banks will do more to accommodate people in severe difficulties with their mortgages now that they have suitably trained staff with a "menu of solutions" available.

Speaking in Limerick today, Mr Noonan said the issue has gone on too long. "We are disappointed it didn't happen earlier," he said. "This has to be dealt with in the interest of the people who are in debt because they can't manage their full mortgage repayments, but also in the interest of the country.

“ You can’t have 100,000 families in a small country not participating in the growth of the economy and they can’t participate if they are burdened with debt,” he said.

Mr Noonan said the banks, since the Keane report, know the "menu of solutions" available to them. He said the Central Bank have been discussing these with the banks.

“The banks themselves lacked staff who could interrelate with people who had impaired mortgages but they have trained up significant numbers of staff now and they have the menu of solutions so there is no particular reasons why they wouldn’t proceed and they are committed now to proceed and we will have details of the arrangements they have made with the Central Bank going on later this week,” he said.

However, he warned the mortgage system would collapse without the threat of repossession. Mr Noonan said that while there is no intention of the practice becoming widespread, the bank’s repossession policy has to be there as “part of the set of solutions”.

Mr Noonan said Ireland has a very low level of repossession by international standards and believes the real emphasis should be on the rental sector.

He said people who own buy-to-let properties who are collecting rent should pay the interest on their mortgages. “If they can’t the investments should be sold and people who can pay the investments should own the property,” he said.

“The policy is in terms of personal mortgages on family homes is that repossession would be a last resort but you have to have repossession as part of the set of solutions because many of us have mortgages and we know the basis of it. You get a loan and the deeds of the house are taken by the bank and if the deeds are no use and they can never get possessions of the property, why would you pay?” he asked.

The Minister described repossession as a “back stop” for the banks to protect their collateral.

When asked if he shared the view of some of his party colleagues that comments by the secretary general of the Department of Finance John Moran were insensitive to those in arears when he suggested the tax payer could not continue to subsidise them, Mr Noonan replied: "John was in the Public Accounts Committee as accounting officer and he is legally obliged under the law and under the Constitution to tell it as it is . He is supposed to the answers put to him by deputies honestly and in a straightforward manner.

“He did that and he made it quite clear that he didn’t see on the personal mortgage side a lot of repossessions, very few. But he said we have very low levels of repossessions at the moment if you make international comparisons.”

According to Mr Noonan, the average arrears for the 35,000 impaired mortgages in AIB is ¤13,000. "So when you look at the average, it doesn't look like an awful lot of money but people have been drifting into arrears and settlements have to be made," he said.