Fitch expects Irish property prices to fall by 60% compared to their peak in 2007 and now expects 20% of the mortgages in a typical portfolio to default.

The rating agency had previously forecast overall values to fall 50% and had put defaults at 15%.

It says that "in a stressed scenario, equivalent to a AAsf rating level, foreclosures are expected to reach 40% and house prices fall by 72% from peak levels."

It has noted that there has been a sharp increase in mortgage arrears since the last criteria review.

It also says due to the delay in economic recovery, the austere fiscal consolidation and falling house prices, the speed at which arrears are increasing is unlikely to slow in the near future.