The Central Bank has said it is not comfortable with the high level of mortgage arrears, and wants mortgage lenders to do more to tackle the issue.
Figures to be published at the end of the week are expected to show that one in ten mortgages are now at least three months in arrears.
Central Bank figures contained in its annual report - published today - show that last year the mortgage arrears rate rose from 6.3% in the first quarter to 9.2% in the fourth quarter.
This figures is expected to rise above 10% for the first quarter of this year, or some 75,000 residential mortgages.
A lot of these mortgages have been put on interest only deals.
But the Financial Regulator Matthew Elderfield said the banks have to look at other ways of dealing with the arrears, such as reducing the amount of debt owed.
He has asked the banks to divide their mortgage books into cases that can benefit from interest only deals, those who need debt reduction deals, and those who can not be saved.
He said he will meet each bank board soon to ask directors to personally focus on the arrears problem.
The Governor of the Central Bank, Patrick Honohan, said the bank was carrying out its own survey research into mortgage holders, their income situation and their ability to repay debt. He said an improvement in the employment situation would lead to a rapid improvement in the mortgage arrears situation.
Professor Honohan said that while banks remained adequately capitalised to deal with the problem, they would have to manage that capital carefully. "Banks are now reporting very large capital adequacies so there is an awful lot of losses that we would expect to be taken out of that capital over time. That's what it was put in there for but the capital needs to be managed efficiently," he said.
The Central Bank will publish the arrears rate for buy to let mortgages later in the year, but said it is much worse than the situation in residential mortgages.
The Central Bank Governor also said today it was disappointing that Irish bond yields remained at unfavourable levels halfway through the country's EU/IMF bail-out.
But Professor Patrick Honohan said it would be a "huge leap" to infer this meant a second aid programme would be needed.
Markets had responded positively to Ireland's steady progress in meeting its bail-out targets, sending yields on its benchmark 2020 bond to an 18-month low of 6.76% earlier this month. However, the mood of uncertainty spreading across Europe saw borrowing costs rise sharply last week.
Professor Honohan said that while some countries whose bail-out progress had been as well received had regained access to bond markets 18 months into their programmes, the external environment has scuppered any hopes of Ireland doing the same.
Ireland's €67.5 billion of international bail-out loans run out at the end of 2013.
"It's not that the fiscal adjustment is not delivering as it is intended to, it's that the market conditions overall are very bad for Ireland so any country with a still very high debt ratio and an increasing debt ratio doesn't have access to the market," Honohan told a news conference as he published the Central Bank's annual report.
"(But) I think it would be a huge leap to infer what might happen in the coming months," Honohan added when asked if his comments should be interpreted as meaning Ireland would need a second bailout.
"I don't really want to be giving out Plan B, C and D or anything like that. Plan A is a good one," he said.
With a major refinancing hurdle looming in early 2014, Ireland has just over a year to return to bond markets and Finance Minister Michael Noonan said last week that the prospects of Ireland starting to tap longer-term funding on schedule now looked less certain.
Central Bank to pay almost €1 billion to the state
The Central Bank has reported a profit of €1.2 billion for the year to the end of December 2011 with most of the profits coming from lending money to commercial banks.
After making deductions for its own expenses and retained earnings, the Central Bank will pay €958m to the Government as a dividend. This is up on the €720m it paid in 2010.
Despite these higher profits, Central Bank Governor Professor Patrick Honohan has decided to cut his own pay.
Last year Mr Honohan gave back €41,700 of his €276,000 salary, while this year he is giving back €63,000. This will see him end up with a net salary of €213,000, down from €234,000 last year.
Its annual report today shows that the Central Bank almost doubled the number of enforcement actions taken against financial institutions from 797 to 1,419.
The number of onsite inspections more than doubled, from 137 to 325.
The report also shows that the Central Bank's investment portfolio was worth €18.7 billion, up €0.5 billion on 2010.
The Bank said it maintained a major role in the continuing resolution of Ireland's financial crisis last year. ''Important reforms were advanced in the domestic banking sector in addressing the capital needs, asset management and restructuring of the covered institutions,'' it said in its annual report.
It said it also continued to provide substantial liquidity supports to the country's financial system..
In its regulatory role, it also published a revised consumer code while focussed consumer protection initiatives were advanced.