As home loan rates fall to their lowest ever levels, lenders are completely changing the way they do business.

The old practice of only lending a small multiple of a salary to buy a home is now being abandoned with some lenders now basing the decision on ability to repay and others on a much larger multiple of salary.

One of the main reasons is the low level of mortgage rates which most lenders now expect to be the norm. After all, our rates are now the euro's rates and German mortgage holders have rarely had to pay even 10 per cent on their home loans.

Even over the past four months, the cuts in rates means you can buy a £190,000 home for the same repayments as a £150,000 home would have cost in October 1998.

This is one of the reasons why house prices are still running ahead but it also means that lenders believe people can generally afford bigger mortgages.

And of course this is true if you believe that interest rates are now permanently low. Some lenders are admitting what many have known to be true for quite some time They are lending what they loosely call "professionals" a far larger portion of their salary than ever before.

And even the Central Bank no longer seems too put-out by the prospect, tacitly admitting that it has lost the battle against the lenders. In the past it has been keen to stress that lenders would normally inform it of changes and they have let it be known that lending too much is frowned upon. But last week, the tune had changed. The traditional methods of mortgage lending are only a "custom" which has grown up and the Bank does not need to be informed of any changes, its spokesman said.

Traditionally, lenders have only offered borrowers 2.5 times the main salary plus the value of the second salary. But now many are automatically going to 3.25 times or even 3.5 times the first salary plus the second.

For someone on £30,000 this can make the difference between borrowing £75,000 or £97,500, often making the difference between being able to climb onto the ladder or not.

Brokers say that ICS, AIB and First Active will all generally allow three times a gross salary and for higher earners above £30,000 will go a little higher. Other lenders such as EBS stick with more conservative guidelines, unless they already have a strong relationship with the borrower.

However, one condition which most of the lenders insist on is that the borrower be a so-called "professional" or white collar worker, according to Mr Brian Moloney, of Moloney Mortgages in Donnybrook. Brokers say that lenders generally are not as keen on applications from people in the trades, despite their very high levels of pay in recent years.

The other new way in which lenders are assessing the amount to lend is based on after tax or net income. This means that those without large credit card or car loans can borrow more than those who are already heavily indebted. Normally it works out between 35 and 38 per cent of net income. "The big thing is that if lenders can get clear evidence of ability to repay they will increase the amount," Mr Moloney says.

This would mean that a married person on about £30,000 with a net monthly income of around £1,500 would be assumed to be able to afford repayments of around £570 which equates to a mortgage of about £87,300, higher than the £75,000 more generally allowed. However, if that same person had a car repayment of £150 a month they may only be allowed to borrow £78,600.

The net income ratio is already widely used by most lenders as an add-on to their standard valuation package but lenders now say it will be becoming the main criteria rather than a simple double-check.

One group of people who will benefit more than many others will be directors and other employees who receive annual dividends and other boosts to the regular monthly income. For these clients, most lenders will now do an annual net income calculation which can often significantly boost the amount they lend.