Permanent TSB has confirmed it is to write off residual mortgage debt where the borrower does not have the capacity to repay.

Fianna Fáil Spokesperson on Finance Michael McGrath TD welcomed the announcement and called on other banks to follow suit rather than selling loan portfolios to vulture funds for knock down prices.

Deputy McGrath said: "If the banks in Ireland are to make meaningful progress in addressing their large portfolio of non-performing loans, writing off mortgage debt in these circumstances is an option which must be on the table.

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"The banks were recapitalised with tens of billions of euro by the State and some of this money was to deal with the mortgage arrears problem.

"From the perspective of the borrower, this option at least provides some certainty and the prospect of a fresh start. However, many of these buy-to-let properties are rented out and the question of how it impacts on tenants in this situation needs to be addressed.

"In the region of €1.5bn of mortgage debt – relating to both owner occupier and buy-to-let mortgages – has been warehoused to date under the split mortgage 'solution'.

"There is no provision as to how the borrower will be able to make the large bullet payment at the end of the warehouse period. In at least some of these cases, the write off option should have been considered."

(CD/JP)