Banks are being warned to act on nearly 40,000 customers who have mortgage arrears unpaid for more than 90 days.

With property prices soaring close to Celtic Tiger levels, banks have also been ordered by the Central Bank to be extra "vigilant" in dealing with new customers who begin to fall into arrears.

Central Bank director Gerry Cross said the problem was also causing "deep stress" for homeowners struggling financially and needs resolution.

It comes as the Taoiseach Micheál Martin said that the rising cost of food and energy will continue "right through to the end of the year" and warned that the Government "cannot be bringing in separate measures every week".

As the costs of living hikes begin to hit hard across the board, banks warned that thousands of families in long-term arrears could lose their homes, according to David Hall, of the Irish Mortgage Holders Organisation.

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The Taoiseach's comments were echoed by European Central Bank chief economist Philip Lane, who said yesterday that countries across Europe may have to get used to high prices.

Mr Lane cautioned that while most of the euro zone's high inflation is an "imported shock that will fade away over time", he warned that "fading away from inflation doesn't mean that these high prices will reverse. Europe may have to get used to higher prices."

Inflation in Ireland is tipped to hit 6.7% this year, a level not seen in Ireland for decades.

Gerry Cross, director of financial regulation, policy and risk at the Central Bank, will today outline to the Joint Oireachtas Committee on Finance, Public Expenditure and Reform his continuing concerns that the number of people with mounting mortgage arrears is not being tackled.

In a statement for the committee, Mr Cross will explain: "One aspect of the retail lending sector that is not changing as quickly as we would like to see is the level of distressed debt in the system.

"About 47,000 principal dwelling households are still in mortgage arrears, of which 34,000 have missed at least three payments and are 90 days or more past due." Mr Cross's statement continues: "This is a source of deep stress for the families and individuals concerned. Successfully resolving distressed debt is important to the fair treatment of borrowers as well as to the effective support of the domestic economy.

"As well as dealing with existing arrears, we have been clear with lenders on the need to be vigilant to identify and deal with new arrears cases. We expect lenders to have in place a range of restructuring options capable of delivering sustainable solutions."

Housing campaigner David Hall said: "The banks haven't really taken action on arrears during Covid. Also during Covid, there was a moratorium. 'Both of those now are unlocked so the question is: what happens?"

In July 2021, the Central Bank said that 29,429 mortgage accounts were in arrears for over a year.

Describing these accounts as a "legacy of the pre-Covid era", they said most of the arrears began during the financial crisis. The figure is down from a peak of 60,995 accounts in arrears in June 2014, but concern persists that the numbers are not being reduced, specifically at a time when inflation is rocketing and as many supports offered by the Government during the pandemic have ended.

Now, house prices are currently climbing at almost 15% a year, with the national average price at almost €328,500 and almost €510,000 in Dublin. There were almost 43,500 mortgages drawn down last year, worth €10.5billion, the highest value since 2008 at the height of the Celtic Tiger boom.

In October last, Ed Sibley, deputy governor of the Central Bank, said extending mortgage repayments for borrowers into their 80s or 90s is "one of a range of resolution options" for people deep in mortgage arrears who are in or nearing retirement.

Mr Sibley urged lenders to "think more imaginatively" to come up with solutions for the "significant problem" of long-term mortgage arrears cases.

Meanwhile, Mr Martin warned that the war in Ukraine was leading to rising costs.

"The war itself is significantly adding to and making worse the inflationary pressures on our economy, particularly on households and people generally," he said.

"That is across the board, particularly in energy, but it will be manifested in food and other commodities, particularly certain metals.

"Transport routes have been disrupted because of the war so the cost of trade is increasing. Trade has switched to sea freight, which is slower and more costly."

Mr Martin said: "The annual rate of inflation in Ireland rose to 5.7% in February. Euro-area inflation was 5.8%. Wholesale oil prices are up 40% compared to January, on average, and gas prices are up 60%."

Mr Martin added that Ireland has asked the EU for "flexibility" around the application of VAT. However, he said Ireland needs assurance that it will not lose historic derogations and return to a higher rate.

Sinn Féin president Mary Lou McDonald told the Dáil that the Central Bank last week told Sinn Féin's finance spokesperson Pearse Doherty that homes would see energy and food costs rise by €1,900 this year.

Mr Cross added: "When a borrower is offered an alternative repayment arrangement, it must have the realistic potential to resolve the borrower's arrears position on an appropriate and sustainable basis.

"As part of the financial services landscape, credit unions continue to fulfil a central role, and while that landscape is changing, we want to see a sustainable sector serving local communities across Ireland."