Mortgage-holders cannot be expected to subsidise their neighbours in arrears, Minister for Transport Leo Varadkar said this morning.

Mr Varadkar said Irish banks will be forced to face-up to the reality of nonperforming loans and that banks will be compelled to restructure half of the home loans that are in arrears.

He added that taxpayers - as owners of the banks - could be liable for any losses realised.

He also said banks would have to pursue those strategic defaulters who refused to pay their mortgage,

“I think it’s a false premise to suggest that somehow there’s a conflict here between the banks on one side and mortgage holders on the other,” he said.

“We need to bear in mind that there are 120,000 mortgages or so in distress, but there are 600,000 people who are paying their mortgages, and struggling to do so, and making sacrifices to do so. They can’t be expected to pay their neighbours’ mortgage either.”

About 80,000 home loans have been restructured, with the majority of these performing, he added.

“We also have to bear in mind that us as taxpayers are the owners of the bank. Any policy has to balance those facts as well,” he told RTÉ Radio this morning.

Earlier this week, the Central Bank published a revised code of conduct for dealing with mortgage arrears that removes the 12-month moratorium on legal action against people who have fallen behind on their payments.

Instead homeowners who have exited the Mortgage Arrears Resolution Process without reaching a deal with their bank will have between three and eight months before legal action can be taken against them.