The Central Bank governor Patrick Honohan says he believes so-called split mortgages could be the solution to the country’s debt crisis.

Split mortgage allow borrowers to repay only a portion of the loan the can afford and park some the remaining debt for years until their home is sold or their income changes so they can pay the mortgage.

Speaking at a conference in Dublin, Governor Honohan said there was no point in offering this type of solution if at the end of it all “the borrower could end the term still in debt”.

He said there should be an incentive to borrowers to stick with the modified payments if not all the warehoused debt had to be repaid.

So far, just a few dozen split mortgages have been piloted by the banks with various different designs. Some banks insist that customers pay full interest on the parked loan while others require none or apply a reduced rate.

According to the most recent figures from the banks, nearly 95,000 mortgages, or 11.9% of the total, were in arrears at the end of last year.

The Central Bank has given banks a year end deadline of offering long-term loan forbearance plans to customers in arrears. If not they face having to hold greater levels of capital. The chief executive of Permanent TSB bank, Jeremy Masding, said yesterday that of its 20,000 customers in arrears, just over 9,000 have been offered long-term forbearance deals.

The Central Bank chief urged lenders to be “imaginative” in coming up with solutions.

Governor Honohan stressed today, though, that they will be no widespread writing off of mortgage debt.

“Despite the anger and disappointment felt by so many who have suffered a financial loss from housing investments, permanent debt relief is not something that can be offered to all, but has to be limited to those who are truly over-indebted to the point of insolvency,” he said.