KBC BANK has seen an increase in keys being posted back to the lender as borrowers abandon properties and repayments, according to a source in the bank. However, a spokesperson for the lender denied the increase in so-called jingle mail, stating that "KBC has had very few instances of customers surrendering their keys".

About 5,000 of the bank's 60,000-plus home loans customers are in arrears and 3,000 of those are more than three months behind on their mortgage payments.

Despite the more difficult economic environment since the recent austerity budget, all of the major mortgage lenders say they are not seeing any increase in the number of people abandoning properties and sending keys back.

"We have not seen this practice happen to any material extent," said a spokesperson for Bank of Ireland. "However, in the event of it happening, the borrower would continue to be fully liable for the debt."

AIB said it had not repossessed a family home in the past six years as it was very proactive with customers in difficulty. However, figures on repossessions of investment property were not available, according to a spokesperson.

Ulster Bank and First Active said their information on repossessions was confidential; they also refused to provide information on mortgages in arrears.

The most recent figures from the Central Bank show an 11% increase in the number of home-owners in arrears with their mortgage interest payments. Over 40,000 were in arrears by September last year and 200,000 are estimated to be in negative equity.

However, experts believe the number struggling to meet their payments is significantly higher than both of these figures combined and that negative equity is much more widespread than official estimates suggest.

In the nine months to the end of September 2010, mortgage lenders across the state had 522 repossessed residential properties. In the third quarter, 98 repossession orders were granted; 17 of these were for properties that had been abandoned and only three were voluntary repossessions.

The British government estimated that 40,000 home-owners were in negative equity when the housing market crashed there in the 1980s. Market experts at the time believed the figure was realistically at least two million, with house repossessions hitting 75,000 at their worst in 1991. It took years for many people to get out of arrears.

There have been some attempts to alleviate the situation of struggling homeowners in Ireland. The revised code of conduct on mortgage arrears came into effect on 1 January in an attempt to help borrowers maintain ownership of their homes.

Under the revised code, banks can no longer impose penalties on customers in mortgage arrears or force them to surrender tracker mortgages. The code also includes a scheme to allow borrowers to defer the payment of interest and a strengthened 12-month stay on repossessions.

The changes to the code deal with mortgages on principal private residences only. The rules do not apply to residential investment properties and there are no plans for legislation to help struggling owners of investment properties or holiday homes.

According to Brendan Byrne, director of research at the Law Reform Commission, "handing back the keys is neither here nor there. The mortgage-holder is still liable to pay the mortgage". He added that the EU is a single market for debt, so if the mortgage-holder leaves the country, the debt will follow them to another EU state. If they go to the US or Australia, any court orders attained in Ireland would have to start again from scratch in those jurisdictions. However, this might not put a lender off chasing the debt, as we may see in the case of David Drumm, the former chief executive of Anglo Irish Bank who has filed for bankruptcy in the US. Admittedly Drumm's borrowings in Ireland are significant, and borrowers of more modest sums might not be pursued so aggressively.

The IMF/ECB support agreement includes a commitment to revise the bankruptcy laws by the first quarter of 2012. However, according to Byrne, any new bankruptcy legislation will not include secured debt, such as a mortgage, in a personal debt settlement. The debt limit before a forced bankruptcy will be raised to €50,000 from €1,900 and the debt settlement period will be reduced from 12 years to between three and five years. However, any difficulty with paying back the mortgage on the family home will remain for years to come.