Both the Central Bank and the Minister for the Environment have agreed that mortgage-lending criteria should not be changed until the levels of supply and demand were more equal, the Dail was told.

The Minister for the Environment, Mr Dempsey, said both he and the Central Bank accepted that assessment made in the second housing report by Mr Peter Bacon. He was reporting on his meeting with the Central Bank following advertisements by the Bank of Ireland which changed the financial criteria for house buyers to get a mortgage.

The Minister also said that under the "serviced land initiative", 166 schemes put forward by local authorities had been approved to service in excess of 15,000 acres of land or more than 100,000 new house sites. Special funding had been provided and local authorities have been asked to "progress approved projects as a priority".

He told Fine Gael's environment spokesman, Mr Alan Dukes, that more than 41,000 sites would be provided in Dublin, almost 4,000 in Kildare, 4,244 in Meath and 4,190 in Wicklow. Cork and Galway would have almost 11,000 extra sites while Limerick would have 9,000 and Waterford more than 3,000 extra sites.

Mr Dempsey told Mr Eamon Gilmore, Labour's environment spokesman, that there "appeared to be a loosening" of the guidelines agreed by the banks themselves that borrowing could be up to a limit of 2 1/2 times the principal earner's income plus the subsidiary earner's income.

He had asked the Central Bank to exercise its "prudential role" in relation to mortgages and lending criteria if advertising by an associated bank was in breach of the guidelines.

Mr Gilmore asked the Minister whether he accepted that if those criteria were applied, a couple with a combined income of £50,000 could not now obtain a loan to buy a starter home in the greater Dublin area. He also asked if Mr Dempsey planned to introduce legislation to enforce lending criteria.

The Minister replied that if the banks and financial institutions were moving away from established criteria "in a significant way", he would pursue this under Section 79 of the Central Bank Act.