Taoiseach Enda Kenny has indicated that action may be taken against the banks in the budget if they fail to reduce variable mortgage interest rates.

He told the Dáil Minister for Finance Michael Noonan had instructed his officials to monitor what the banks were doing about the issue.

“We have a budget coming up in October,’’ he added. “There are opportunities for the Minister to deal with the banks if that is the case and if that is necessary.’’

Mr Kenny said he expected to see the banks reduce their interest rates. “The Minister has given them a warning and I would expect them to follow up,’’ he added.

Mr Kenny said he accepted the current situation was not morally justifiable.

“That is why the Minister for Finance met with each of the six banks and told them a piece of his mind about what they should do,’’ he added.

Mr Kenny said three banks had introduced measures which would see rates fall below four per cent.

The Taoiseach was replying to Fianna Fáil leader Micháel Martin who said Wednesday was the deadline for the banks to come back to Mr Noonan on the issue and state what the reductions were.

Mr Martin said it was a massive issue in households across the country.