A review of banks' mortgage lending policies for first-time buyers carried out by the Central Bank and Financial Regulator has identified a number of concerns in the sector.
The Regulator said it carried out the review to ensure that there were strong safeguards in place, in the interests of both borrowers and lenders.
It also warned that it was prepared to intervene in banks if it thought safeguards were not strong enough.
Despite the subdued mortgage market, lending to first-time buyers accounts for almost 40% of new mortgages.
The Regulator said some banks were planning to increase business in this area.
The review said lending decisions to first-time buyers were now based on 'more realistic' factors and controls on lending had been tightened.
However, it expressed concern that some banks were not using reliable measures to assess risks when developing new mortgage products or strategies.
It warned banks in particular about basing their decisions on moves by rival banks in the market.
The review also said there was evidence that independent bank directors had 'limited involvement' in assessing and examining new mortgage lending policies.
It also urged banks to take more account of the suitability of certain mortgage products to certain customers.
