UPDATE 1-One in 7 Irish mortgages in trouble-Central Bank
* Number of troubled mortgages up 8 percent since end-2011
* Unemployment, falling house prices make repayment tougher
* Big risk that losses exceed stress test results-analyst
DUBLIN, May 25 (Reuters) - The number of problem mortgages in Ireland grew 8 percent in the first three months of the year, increasing pressure on banks and highlighting the government's problems in trying to revive the economy after a property crash and years of austerity.
More than one in seven Irish home loans are not being fully repaid and repayment is getting more difficult as unemployment remains stubbornly high and house prices keep falling, figures from the Central Bank showed on Friday.
A total of 116,288 mortgages were either in arrears or had been or had been restructured, up 8 percent compared with the start of the year.
"Mortgage debt is the biggest problem that the Irish economy will face over the next couple of years and there is no sign this is getting any better," said Dermot O'Leary, Chief Economist at Goodbody Stockbrokers.
While the banks have booked huge losses on their bloated commercial property books, relatively few residential loans have been written off. The central bank, which has been working with banks on schemes to ease pressure on struggling mortgage holders, has described the arrears as one of the biggest challenges facing the country.
Stress tests carried out as part of Ireland's EU-IMF bailout have prompted banks to bulk up their balance sheets to deal with rising arrears, based on an assumption that 6.7 percent of their combined mortgage book would never be paid back.
But a report from the European Commission warned last year that losses could be higher than anticipated.
"There is a very real risk given these numbers that in terms of mortgage books the losses will be greater than the adverse stress test scenario," O'Leary said.
The proportion of loans in arrears for more than 90 days was 10.2 percent at the end of March, up from 9.2 percent at the end of last year.
The figures only include owner occupiers and not investors who bought properties to rent out, which represent some 22 percent of outstanding mortgages according to research carried out by the central bank last year.
The government, which needs the economy to grow to help it cut its own mountain of debt, announced proposals in January for new personal insolvency and bankruptcy regimes.
But insolvency experts have said it is too soon to say how the new rules, which have not been finalised, might help.
Highlighting the level of forbearance being shown by lenders, repossessions since the central bank started issuing data in late 2009 stood at just over 1,050 at end-March, far below the 40,000 repossessions assumed in the stress tests.