The Minister for the Environment Mr Dempsey is to meet Central Bank officials this week to discuss the breach of mortgage guidelines by Bank of Ireland. Mr Dempsey has sharply criticised BOI, accusing it of acting irresponsibly.

The bank is offering to lend three times the salary of the principal earner plus one and a quarter of the secondary borrower. A spokesman for Mr Dempsey said last night that it was generally accepted that the level was 2.5 times the principal earner's salary.

"The Minister believes that the Bank of Ireland move is very badly timed, given that we are beginning to get house prices under control and it could fuel house price increases," he said.

The spokesman confirmed that either Mr Dempsey or Department officials would meet Central Bank representatives this week to discuss the issue.

However, a BOI spokesman said the issue had been raised with the Central Bank, who in turn had raised no objections. No Central Bank spokesman was available for comment.

The BOI spokesman said it was his understanding that lending based on ability to repay was becoming the norm in the Republic. He said the bank's guidelines had been in place for some time and that BOI which has around 22 per cent of the mortgage market was seen as a conservative lender.

Meanwhile, the latest Irish Permanent Property Index shows that house prices continued to grow last month, but the annual rate of increase continues to moderate.

The index reveals that national house prices were 18.9 per cent higher in August than in August 1998. This compares to July 1999 when prices were 20.2 per cent higher than in July 1998. Between July and August house price growth slowed to 1.6 per cent, from 2.1 per cent.

The index shows that the highest year-on-year growth was recorded last December when house prices were 29.8 per cent higher than in the previous December. Irish Permanent claims to be the biggest home loan provider - accounting for one in four of all mortgages bought in the Irish market. The index, which is compiled in association with the Economic and Social Research Institute shows that in the first eight months of the year national house prices rose by 11.3 per cent. This compares to 21.5 per cent over the same period last year.

The index shows that Dublin house prices continue to rise faster than in the rest of the State - 1.7 per cent, compared to 1.3 per cent, between July and August. It brings growth to 13.3 per cent in Dublin and 10.8 per cent elsewhere for the first eight months of 1999.

The index also found that price growth for first-time buyers has exceeded that for second-time buyers - 13.2 per cent compared to 10 per cent. It says the average price paid by a first-time buyer last month was £93,106.

The index also reveals that the price paid for a new home is continuing to rise considerably - 17.1 per cent higher in August this year, than in August last year. Second hand house prices were 19.7 per cent higher last month than in August 1998.