Allied Irish Banks, the State's largest, and First Active have said that they moved away earlier this year from the home loan assessment criteria traditionally employed by lenders in the market.
This follows news that Bank of Ireland is offering to lend three times the salary of the principal earner plus one-and-a-quarter times that of the secondary borrower.
The Bank of Ireland change in practice was sharply criticised by the Minister for the Environment and Local Government, Mr Dempsey. He said it was generally accepted that mortgage lenders would offer a loan to the value of 21/2 times the principal salary plus the secondary figure.
Last night, a spokesman for Bank of Ireland said it was "surprised" by the Minister's comments. He said the change reflected a situation where low interest rates and lower taxes meant borrowers could repay more and the bank was following, rather than leading, the market.
As part of the test for anyone borrowing a substantial amount the bank may now look at what would happen if interest rates went up by three percentage points, he said, compared to two points previously. Its change of policy had been fully discussed with the Central Bank, which had raised no objections, he said.
The Central Bank itself would make no comment, beyond confirming that the system under which institutions advanced 2.5 times the original salary was an industry norm, and not a guideline set down by it. It would neither confirm nor deny it had approved the new practices.
AIB said its decision to assess customers for mortgages on the basis of "debt service ratios", which calculate customers' after-tax income repayment capacity, as opposed to multiples of their income, had been approved by the Central Bank.
The bank assesses the size of the loan it will offer on the basis of a customer's after-tax effective income as determined by the bank itself. "We're interested more in how much a customer can afford to pay us than in how much they earn," said a spokesman.
"It's a very, very solid approach. It's not in our interest to make a bad lending cost. The system produces different results for different people."
A spokesman said the system had been used on a trial basis for 14 months before its introduction last March.
First Active's head of marketing, Mr Aidan Magennis, said its new system had also been approved by the Central Bank. The change was introduced last June.
A couple with a joint annual gross income of £35,000 or less can borrow up to 2.5 times the sum of the principal annual salary and half the secondary annual salary, or an amount where repayments are up to 35 per cent of net (after tax) disposable income. For those with higher incomes First Active will extend 3.25 times the sum of the main salary and half the second salary, or an amount resulting in total repayments of up to 40 per cent of disposable income.
An Irish Life & Permanent spokesman said the company was reviewing the situation. It was among other lenders who said they would not be changing their assessment criteria from the traditional system immediately. None of the institutions contacted by The Irish Times said it would be changing the maximum home loan it would grant, generally 90 per cent of the value of a property.
EBS said it supported the current Central Bank guidelines and saw no reason to change these at the moment.
TSB's head of marketing, Mr Sean Curtis, said the bank had no plans at the moment to review its lending strategy.
Ulster Bank's chief executive for retail and branch banking, Mr John McNally, said it was not changing its criteria.
