THE halving of mortgage interest rates in recent years and the increase in net income as a proportion of gross income - resulting from lower taxation - were the main arguments for revising the Central Bank's mortgage guidelines of 2.5 times a person's gross salary, the economist Dr Peter Bacon said yesterday.

Dr Bacon was speaking at a conference on "The Future for Property Investment", organised by the Institute of Directors in Ireland and Business & Finance magazine.

But the author of the two Bacon reports said changing the current guidelines would be "daft" in the absence of a supply response to the housing shortage. He said servicing a loan at a 5 per cent interest rate was different to when rates were at 10 per cent. But any new measures would have to await "innovation on the supply side". It would be for the Central Bank to examine the proposals, he added. Dr Bacon's comments follow the Central Bank's warning to three financial institutions about breaching mortgage guidelines.

Dr Bacon said he had not seen the Irish Homebuilders' Association's proposals for a shared equity scheme but he agreed with the principle. "Again the key is linking it to additional supply."

He outlined a series of his suggestions to Government to increase the supply of housing. These include speedier planning procedures, implementation of higher housing densities, and the relief of "infrastructure bottlenecks".

Mr Richard Barrett, a director of the property company, Treasury Holdings, emphasised the transport bottleneck as hampering development, saying, as traffic became more congested, the option of using public transport became less attractive and "a truly vicious transport cycle" was entered into.