Banks are not moving fast enough to sort out mortgage arrears and the concept of strategic default is a 'phoney' one, the Central Bank governor Patrick Honohan has said.

Mr Honohan has said strategic default is a “phoney concept” and that it is actually a consequence of people prioritising what debts they repay.

He also told the Oireachtas Finance Committee that banks are still not moving fast enough to address the problem of mortgage arrears and some appeared to think that the issue would resolve itself.

Mr Honohan said of the 98,000 households in arrears of more than 90 days, three out of every four were not yet in an arrangement with the lender to resolve the problem.

“Despite all of our efforts, and despite real progress in policies, processes and staffing, far too many arrears cases have still remained untreated, whether sustainably or not,” he said.

On the issue of what constituted sustainability, he said a sustainable arrangement was one that was affordable for the borrower in the short and the long term, and provided sufficient clarity on what happens to the collateral at maturity.

He said the Central Bank’s guidelines sought to put “sufficient flesh” on this concept to allow the criterion to be audited.

Prof Honohan said the Central Bank was not empowered to insist on debt forgiveness for any particular borrower.

“Relief for an insolvent borrower from indebtedness is determined ultimately through the insolvency procedures for which legislation has so recently been reformed and in a direction which is rightly much more favourable to the insolvent debtor than was previous legislation.”

He said the Central Bank helped to advise on the drafting of the legislation and has been supportive of its aims.

“Use of this legislation will be an important means of ensuring that over-indebtedness problems, especially those involving multiple debtors, can be resolved.”

The Central Bank set targets earlier this year for lenders to provide sustainable solutions to those customers with mortgage arrears of 90 days or more.

Banks were due to propose solutions to 25 per cent of those in arrears for 90 days or more by the end of June.

They are due to propose solutions to 50 per cent of those in arrears by the end of September and by 75 per cent of those in arrears by 2014.

Central Bank figures released in August showed nearly a fifth of mortgage holders are in some sort of arrears.

More than 97,800 private residential mortgages were in arrears of over 90 days by the end of June, some 12.7 per cent of home loans, compared with 12.3 per cent in the previous quarter.

The number of mortgages that had fallen behind by more than 180 days rose by 3.8 per cent. The latest figures showed some 57,163 householders were more than a year behind on payments, while just over half of those at least two years behind.

In relation to the Anglo tapes Mr Honohan said the material contained “no smoking gun” with regards to criminality.