The housing market could be heading for a British-style collapse if prices continue rising rapidly, the State's biggest building society has warned.

Mr Martin Walshe, head of lending at EBS, said he completely agreed with the Central Bank when it warned lenders about disturbing practices and said they were adding fuel to escalating prices.

The Minister for the Environment, Mr Dempsey, and Fine Gael finance spokesman, Mr Michael Noonan, also supported the Central Bank's call for prudence in mortgage lending.

Alone among mortgage lenders, EBS and Bank of Ireland confirmed that none of the practices outlined by the Central Bank applied to any of their customers.

First Active, in contrast, refused to comment either way.

The Central Bank has written to the chairmen of all the lending institutions outlining a list of problems which officials had uncovered during investigations.

These ranged from lack of evidence about where money was coming from, to "excessively high thresholds of disposable income" being used as well as "potential future earnings" in determining how much money to lend.

Mr Walshe said the EBS agreed with everything the Central Bank letter said.

"We have replied, and agree with everything. The point is that simply throwing money at the market does not produce a single house and just adds to prices.

"According to a recent paper, prices are already 10 per cent over trend, and when the UK market crashed, they were 25 per cent over.

"All it needs is another 20 per cent rise this year and the situation will be as bad as the UK was in the late 1980s. The Central Bank is quite right - we need a greater supply, not bigger loans."

But according to the managing director of Irish Nationwide, Mr Michael Fingleton, the situation in Britain was different, as interest rates doubled and taxation changes boosted demand at the same time. "Supply is not our problem. We have to ensure the criteria we use is prudent and enabling. It is not to bring demand into equilibrium with supply but to give people opportunities to get their own home."

He added that the society had already moved from the traditional lending guidelines and now lent amounts with repayments of up to 40 per cent of disposable income. He said he understood the Central Bank's position, but insisted that no lender was being irresponsible and throwing money around. "I am very happy we are complying, and we always keep the Central Bank informed of what we are doing."

A spokesman for Bank of Ireland said the practices highlighted in the letter did not apply to it.

"We know there is a need to maintain prudent lending. We have already replied to the letter and agree there is a need to be prudent.

"But there is also a need to be realistic, and we have made some constructive points in this regard."

The letter from the governor, Mr Howard Kilroy, also covered the ICS building society.

Its managing director, Mr Ted McGovern, called for a balanced debate regarding lending guidelines about 10 days ago.

Other lenders were less categoric. A spokesman for AIB said the bank's loan to valuation rate is well below industry averages and it was quite satisfied it was adhering to guidelines in all sectors, particularly for first-time buyers. But he refused to confirm whether any of AIB's files had been the subject of the Central Bank's letter.

A spokesman for TSB was confident the bank adhered to standard mortgage-lending guidelines.

Irish Life said it was preparing a reply.

"The occasional case may be outside the criteria, but we are happy about our files," a spokesman said. However, the Central Bank has not yet visited Irish Life's offices.

Irish Permanent said it would not comment "as a matter of course", but the spokesman added it was quite happy it held within the guidelines.

Ulster Bank also said it could not comment on any correspondence with the Central Bank.

It added, however, that it operated strong guidelines in the provision of credit, and these tried to ensure it did not provide credit in situations where customers could have difficulty in meeting their commitment to the bank.

A spokeswoman for First Active said the institution had no comment to make.