Setting mortgage loans at 2.5 times a person's salary is overly prudent in a low interest rate environment, the Construction Industry Federation (CIF) has claimed.

CIF director general Mr Liam Kelleher said that with interest rates at less than half of those of five years ago, the 2.5 times salary rule needed to be re-examined. Although there was a growing gap between house prices and the "affordability issue", lower interest rates meant more expensive houses could be affordable, he argued. He was speaking after a presentation of results of construction activity in 1998.

Mr Kelleher said the new housing supply increased to about 42,000 units last year, up 8 per cent on 1997, but would have grown further but for "supply-side constraints".

"It is only new house building that relieves the upward pressure that increased demand brings on housing," he said. He said the CIF wanted a task force established to co-ordinate the delivery of manpower and training amid concerns about a diminishing labour supply.

The CIF's senior vice-president, Mr Frank McCaffrey, said building activity had increased by 10 per cent in 1998 to £9 billion (11.42 billion), representing 17 per cent of Gross Domestic Product.

An increase of 8 per cent is expected this year in the industry which, in the second quarter of 1998, employed more than 180,000 people or 9 per cent of all workers.

The number of new apprentices increased to 4,600 up from 1,800 in 1994.

"If someone had forecast, say in the 1970s, that we would have had this boom, it would have fallen into the Old Moore's Almanac category," he said.

Privately financed non-residential building grew by 13 per cent in volume while publicly funded work increased by 15 per cent. Agricultural construction, however, showed "a significant decline".

Mr Kelleher warned that a Government estimate of £6 billion for roads expenditure over 20 years could be conservative if vehicle usage increased at a greater rate than envisaged. He said an increase in the public capital programme of 10 per cent each year over five years would be in line with the CIF's expectations of the monies required for infrastructural improvement and tackling the "accumulated deficit". The CIF director of housing, Mr Michael Goggins, said "gazumping", or the practice of raising a house price after a verbal agreement has been made, would be outlawed under a code of practice being drawn up by the CIF.