Homeowners on standard variable interest rate mortgages will receive a reduction or the banks will face consequences, Tánaiste Joan Burton has insisted.

She told the Dáil: “I am resolved to see that if the banks continue to turn a deaf ear to the ongoing discussion, expressed by both the Minister for Finance and the Central Bank, those banks will have to face other consequences.”

Ms Burton was responding to Fianna Fáil's Timmy Dooley who raised concerns about the variable rate following reports that the banks would not reduce the rates, currently more than 2 per cent higher than anywhere else in the euro zone.

Mr Dooley said the banks clearly believed the Government’s “softly softly” approach to reducing the interest rates was a “cotton wool exercise”.

The banks had been given adequate time and they knew the Government’s concerns, which were “real”. The Clare TD called on the Tánaiste to make it very clear to the banks “that they either act now or the Government will impose a levy on them”.

Ms Burton, who agreed the variable rate was excessive, said the Central Bank had submitted its research on the issue to the Minister for Finance, who would be meeting the representatives of the six main banks in the coming weeks.

“I have advised the main banks they need to consider their pricing policies,” she said. If they did not listen there would be other mechanisms of addressing this”.