Lenders are set to be given power by the Central Bank to take tracker mortgages off struggling homeowners who are in arrears on their mortgages.
Banks will face heavy restrictions if they are to remove trackers from customers but the move is still expected to affect thousands of borrowers, according to The Irish Independent.
There are around 23,500 mortgages in arrears of two years or more in Ireland at present with around half of these distressed loans on tracker rates.
The move to restructure tracker mortgages comes despite hundreds of submissions urging regulators not to change the strict rules on blocking banks from redrawing the low-cost products.
Regulators are concerned that the system of allowing banks to take trackers off homeowners could be abused and they are set to come down heavily on banks they feel are pressurising people to come off a tracker rate.
This means that banks will have to agree to write off some of the homeowners' mortgage debt.
Along with this, the bank will only be able to remove the tracker if the borrower is so far behind on their repayments that the next move by the bank is to repossess the home.
However, it will be the first time banks will get the powers to strip a mortgage holder of a tracker mortgage.
Under the existing Central Bank code of conduct on mortgage arrears, banks are barred from moving a homeowner off their existing tracker to a different mortgage rate as part of any repayment deal.
Interest charged on some trackers is up to five times cheaper than variable rates. More than half of the mortgages in the market are trackers.
Banks have argued that they should be entitled to take away a tracker from anyone who has gone into arrears and has been offered any form of forbearance, such as interest-only.
Lenders argue that getting into arrears is effectively a breach of contract, so the tracker should be given up once the homeowner gets back into work.
