The government is moving to close a loophole which stopped banks from repossessing homes.

It has agreed to make the change as part of the latest review of the Troika bailout.

The decision has raised the prospect of a wave of house repossessions in the New Year.

Some 11% of residential mortgages in Ireland were in default at the end of June this year.

Spain stops evictions

But Ireland is not the first country to take action over the issue.

Last month Spain passed a decree to protect homeowners threatened with eviction. 

The government has suspended evictions for 2 years for certain homeowners in mortgage arrears including those with children and the long-term unemployed. 

It also pledged to increase the amount of social housing available at low rents. 

Spanish banks have repossessed 400,000 properties since 2008 although not all of them are residential.

But the trend is increasing with 50,000 repossessions in the first half of the year compared with 77,000 for the whole of 2011.

The Irish government has reportedly promised the Troika to fix it so that banks can seize homes that are in mounting arrears.

It is understood it will come into effect in the new year at the same time as the Personal Insolvency legislation.

Karl Deeter is from the Irish Mortgage Brokers.

He outlines how the loophole came about.