The Central Bank has warned the banks and building societies they are lending too much to mortgage borrowers and fuelling excessive increases in house prices.
In a strongly-worded letter, the governor, Mr Maurice O'Connell, has accused them of "disturbing practices" in assessing the size of loans.
The letter, addressed to the chairman of every mortgage lender, outlines a long list of complaints about the way the financial institutions are deciding on the size of mortgage loans and asks for a detailed reply from boards.
The Central Bank has been concerned for some time that the lenders have been breaching guidelines and lending amounts which borrowers may not be able to repay in the medium term.
It has recently uncovered evidence at both head office and branch level of serious breaches of the guidelines. In a worrying development, it even found that some lenders have no record of how borrowers have come by the balance of the money.
It also found evidence that lenders have been including "potential future earnings" for many applicants, as well as income from sources such as room rental and parental guarantees.
In the letter, Mr O'Connell also points to "excessively high thresholds" of disposable income as criteria for loan approvals. This refers to the practice by some lenders of allowing large amounts of the borrower's after-tax income to go towards paying off a mortgage.
Generally, the Bank has also found that the "quality and quantity of information in relation to the income of applicants was inadequate".
The Bank also accuses the lenders of fuelling excessive price rises. It notes that the level of house-price inflation in the recent past has been excessive by any standards.
"There is evidence that, in part, this has been driven by the ready availability of mortgage finance on generous terms."
The letter was sent to the chairmen of all the mortgage lenders in a move designed to underline the seriousness of the Bank's message. It also requests that the chairmen elicit a response from their boards.
A spokesman for the Central Bank confirmed that the letter had been sent to all the lenders, as well as the detail of its contents.
The Bank has been taking an increasingly dim view of the lenders' role in recent house-price inflation. It is concerned that a downturn in the economy or rise in interest rates could lead to widescale problems among borrowers and to the lenders themselves running into problems.
It is also concerned about the boom in house prices itself, given the risk to the economy and social problems which a collapse of the housing market could cause.
In his letter, Mr O'Connell points out that all the institutions have a duty to consider the economic and financial outlook, both in their own interests and in the interests of borrowers.
The governor also warns the lenders that they must look at individual branches as well as head office. "They must ensure that the policies are well understood at branch level and reflect acceptable prudential standards."
The Bank will be intensifying its analysis of mortgage-lending practices to ensure this happens, he adds.
Mr O'Connell admits there may be an "immediate case" for a more relaxed approach to lending, given the current low level of interest rates. However, he insists this is not appropriate in the medium term where borrowers will have to reckon with the potential consequences of rising interest rates and economic downturn.
Moving to a more flexible basis of assessing mortgage loans was mooted by the economic consultant Dr Peter Bacon in his latest report and is due to be the subject of discussion between the Department of Finance, the Central Bank and the lenders.
However, Mr O'Connell has now said it will not enter into the discussions until there is evidence of a general easing of supply pressure within the housing market.