HOMEOWNERS cannot expect to stay in houses where they have no prospect of paying the mortgage, the head of the Department of Finance has revealed in a harsh warning.
The comments from secretary general John Moran are a further sign of the Government's bid to soften up homeowners for repossessions.
Mr Moran told hard-pressed mortgage-holders that the taxpayer was not going to subsidise them to stay in properties beyond their means.
Trying to give some hope to struggling families, Finance Minister Michael Noonan called for banks to strike deals with customers -- and promised to cut income tax "when I get any opportunity".
But at the same time, his most senior civil servant said homeowners could not expect to remain in houses if they couldn't pay the mortgage into the future.
It is a hard-hitting message ahead of the introduction of the property tax this summer, and comes as new figures show that the numbers behind on their mortgage repayments have climbed again.
One in four mortgage-holders is now in trouble as the effects of the recession and the property crash continue to reverberate.
But Mr Moran said there had been an "unnaturally low level of repossessions" of houses in Ireland so far.
He told the Dail Public Accounts Committee that agreements by the banks that resulted in this low rate of repossessions were necessary until a range of measures -- notably the personal insolvency legislation -- were in place to address the arrears situation.
Taoiseach Enda Kenny has already signalled that repossessions are in the pipeline as banks move to deal with the mortgage crisis, but he was quick to stress that this would be only as a last resort.
However, Mr Moran said: "It is not necessarily appropriate that banks should be using taxpayers' money to subsidise people living in accommodation, even if it is a family home, that is beyond their means."
He said it was "surprising" to his officials that there were so few repossessions, given the extent of the crisis. Referring to repossession rates in the US and the UK, Mr Moran said: "Maybe we will move to those levels. We have had as serious a crisis as everybody else."
His comments came as the European Central Bank left its interest rates on hold at 0.75pc. A cut would benefit tracker mortgage holders, but there was no more relief on offer from the ECB yesterday.
New figures for the end of last year show that 186,000 mortgage accounts are now in some form of arrears or have had to have repayments lowered with the permission of the bank.
The numbers who are three months or more in arrears on their residential mortgage have jumped to close to 95,000, the Central Bank said.
This represents 12pc of all residential mortgages. Overall, some 144,000 home mortgages are now in some form of arrears and a third of buy-to-let mortgages are in trouble.
Another 42,000 mortgage accounts have had to have repayments restructured, because the homeowners are unable to meet the repayments. These people are not in arrears.
However, the Irish Banking Federation pointed out that there had been a decline in the numbers getting into early-stage arrears.
The Central Bank figures also show that mortgages arrears grew in the last three months of 2012 at the slowest rate since figures on the issue began to be collected three years ago.
Nevertheless, there has been a 14pc jump in the numbers who are two years or more behind on their payments.
Ciaran Phelan, of the Irish Brokers Association, asked if the Government was really going to sanction the repossession and rehousing of the 23,523 families whose mortgages were two years or more behind on repayments.
Mr Noonan last night expressed disappointment with the banks on the pace of distressed mortgage settlements.
Speaking to RTE's 'Prime Time', he added: "There have to be write-offs (but) they have to be done on a case-by-case basis by the banks."
He said banks had now taken on people to deal with this situation – "in the case of AIB 400 additional people and they trained them to interchange".
"But you have to remember also that an interest only (loan) can suit a lot of people if they have a temporary crisis - if somebody is ill, if somebody is out of work, a capital and interest only can suit a lot of people. There has to be different solutions for different cases measured against the order of difficulty."
He said the Government was bringing in the property tax to avoid hiking income tax.
"I want to keep from increasing income taxes and when I get any opportunity I'll reduce them, especially for those middle income groups," he said.
Also last night, Mr Noonan met with the IMF's managing director Christine Lagarde in Dublin. Ms Lagarde is in Ireland as the country holds the EU Presidency.
The minister is understood to have briefed Ms Lagarde on the progress under the bailout and asked for the IMF's continued support to secure a deal on bank debt.