First National is considering a radical new approach to mortgage lending in an effort to curb rising house prices which are putting new homes out of reach of many first-time buyers. The society has begun investigating whether to build apartment schemes itself as well as advancing "part mortgages" to buyers to help them afford bigger houses.

The move comes as the Department of the Environment prepares to select consultants to investigate soaring house prices. If successful, First National's approach could help alleviate the problems new home-buyers experience trying to buy into a rapidly escalating property market.

Spiralling house prices and increasing numbers of young workers entering the market are worrying building societies which believe property prices may rise beyond the reach of many young people. This would also impact on their new business levels.

Mr Paul Reville, director of banking at First National, confirmed that the proposal has been discussed "in broad terms".

The schemes which the society has examined include building apartment blocks which would then be rented out or entering joint ventures with developers to build. Mr Reville said the options would include developing apartments for pure rental purposes or providing a mortgage on half the value of the property.

"These are not under active consideration at the moment but may be considered in the future," Mr Reville added.

One Irish building society is understood to have become involved in building schemes already. It is believed that the institution is trying it on a pilot basis in London.

The part-mortgage schemes allow people who would otherwise not be able to afford to buy their own home to get a foothold in the market. The institution usually buys the land and builds homes, often in partnership with a builder, and then advances a mortgage on 50 per cent of the home.

When it is later sold, the society is entitled to half the capital appreciation. Thus the society sits on an appreciating asset while the borrower can live in a house he would otherwise be unable to afford. There would also usually be an option to buy out the building society at a later date. The schemes are already popular in Britain. A key obstacle to this approach at present is the high price of land, particularly suitable serviced land which is commanding a premium. First National is expected to consider the schemes when interest rates fall back as Ireland enters monetary union. It may also negotiate deals with builders who already own substantial tracts of land.

Mr Reville insisted that the society has not yet entered negotiations with any individual builders.

The society would need to win approval from the Central Bank for the schemes. However, a Bank spokesman yesterday confirmed that, in theory, there would be no problem.

"We would not see much of a problem with the co-operative type idea," the spokesman said. "The building societies have been allowed build since the 1989 Building Societies Act."

However, he added, that the Bank would take a "close supervisory role".

Factors expected to be included in the study carried out on behalf of the Department of the Environment into house prices include the impact of the first time buyer's grant and of introducing rent controls to encourage an active rental sector.

Today is the final day for receipt of proposals to complete the study.