Homeowners in arrears could be forced to give up their tracker mortgages under plans unveiled by the Central Bank today.
It says that customers who are given some form of long-term debt relief may have their low-interest rate tracker mortgages removed.
Tracker mortgages are pegged to the European Central Bank's main interest rate, which is at a record low of 0.5%. The cost of funding mortgage lending for Irish banks is much higher and the banks are losing hundreds of millions a year on trackers.
"What we're saying is that it has to be in the context of a long-term sustainable solution. It has to make the mortgage affordable for the borrower... and really as a last resort and it's really only going to arise in a small number of cases," the Central Bank's director of consumer protection Bernard Sheridan told Newstalk.
The measure is among a number of new rules which come into force next week.
The Central Bank's updated code of conduct on mortgage arrears (CCMA) removes the ceiling on the amount of contact banks can have with distressed borrowers. There had been a limit of three communications between lenders and their customers, but this has been scrapped and there is now no limit. Mr Sheridan said it was not an excuse for banks to harass people.
The Central Bank has also said that while repossessing homes is a last resort, there will now be a shorter period before legal action begin.
For customers who co-operate with their bank they will have three months to come to some form of arrangement before the start of repossession proceedings. However, the Central Bank is not expecting a flood of repossessions.
The Central Bank said the rules do contain important protections for borrowers and that the goal was to offer long-term sustainable repayment agreements for those in arrears.
Central Bank figures released last week show that more than 95,000 mortgages are more than 90 days in arrears. The regulator has given banks until the end of this month to offer sustainable mortgages to 20% of customers in distress.
To date, its preferred solution of split mortgage (where part of the debt is parked for decades) has been implemented in just 144 cases.
Bernard Sheridan spoke to Newstalk's business editor Ian Guider, where he outlined the main changes.
