A total of 12.3% of private mortgages in Ireland were at least 90 days in arrears in the first quarter of this year, up from 11.9% at the end of December, according to data compiled by Ireland’s central bank.

Almost 20% of all buy-to-let properties are currently in arrears, up from 18.9% in the previous quarter.

By value, 25% of mortgages are in arrears or have had their terms modified. The fact that banks are often reluctant to repossess homes could be encouraging mortgage borrowers to pay off other debts first, according to a report by Bloomberg.

This is partly because of a legal loophole which means that banks cannot seize homes unless demand for full repayment was made before December 2009.

Ratings agency Fitch last week downgraded six tranches from 14 Irish residential mortgage-backed securities transactions, saying the fact that homes are rarely repossessed is helping to drive up arrears.

The banks are now seeking to roll back the tide after the government introduced a new law last month to fix the loophole hampering repossessions. In addition, a new code has been introduced which allows bankers to contact defaulters more than three times a month, ending a previous restriction.