Non-performing property loans in Ireland rose in the first quarter, highlighting the failure of the country's banks to tackle arrears on residential mortgage payments and raising eyebrows among policymakers.

Ireland's stock of bad property debt is one of the major impediments to the economic recovery it needs to set in place by the end of this year if it is to exit its EU/IMF bailout successfully and on schedule.

The central bank has given lenders binding deadlines for getting to grips with the arrears, which it views as its biggest domestic policy issue.

Central bank data showed yesterday that almost one in five Irish home loans, worth 25.5 billion euros, were not being fully repaid at the end of March and the proportion of those in arrears for more than 90 days rose to 12.3 per cent.

That was up from 11.9pc in the previous three months and 11.5pc in the third quarter of 2012.

Lenders, including the Irish units of KBC Bank and RBS, have been ordered to propose sustainable mortgage solutions for 20pc of distressed borrowers by the end of June and for 50pc by the end of the year.

They will be forced to write down the value of the loans if measures proposed are deemed unsustainable.

Demonstrating how deep the problem is in Ireland for those who bought houses before a property crash there halved the average price of a home, almost one homeowner in every five stuck in arrears has been behind in payments for more than 720 days.

But the pace at which Irish households are sinking into the red has slowed as battered property prices stabilise and unemployment, though still high, is back around the levels of three years ago.-Reuters