Credit rating agency Fitch has downgraded 17 tranches of loans within seven bonds backed by Irish residential mortgages due to rising arrears, continued house price falls and the increased cost of carrying delays in foreclosures.

The agency said that it was concerned about the effect of avoiding or postponing foreclosures on borrowers and remained cautious about the “risk of concentrated defaults in the future”.

The “sympathetic handling of borrowers in arrears”, as stipulated by the Central Bank of Irelands Code of Conduct on Mortgage Arrears, has resulted in low cumulative defaults to date, with loans remaining in “later stage arrears”, Fitch said.

The agency said that cumulative defaults had not surpassed 0.2 per cent of any Irish prime mortgage bond.