The International Monetary Fund has backed the Central Bank’s plans to cap mortgage lending.

In a concluding statement following its latest visit, the IMF mission to Ireland said the proposed limits on new mortgages would "increase the resilience" of households and banks against any future financial shocks.

Loan to value and loan to income caps would also "dampen the property cycle", it said.

With the Central Bank due to release revised proposals on the mortgage market this week, the IMF warned that a phasing in of new rules could push up prices in the short-term, as people might "front-load" their borrowings in order to get in before a full introduction.

The mission also cautioned that any exemptions that might accompany the new caps should ensure the financial resilience of qualifying borrowers remains as strong as others.

Overall the IMF mission said Ireland needed to keep spending in check if it wanted to continue on its recovery.

It said the country's recovery was "off to a good start" but it warned that sustained growth and job creation would be needed for a number of years before the damage of the economic collapse was repaired.

Overall it recommended that the country continues to reduce its budget deficit, recommending a "phased and steady" move towards a balanced budget.

"It remains essential to avoid a repeat of recent expenditure overruns, especially in healthcare, and to save gains from revenue outperformance, asset disposals and interest bill reductions", the IMF said in a statement.

The mission recommended that any future discussion on the public wage bill recognises the "very tight fiscal constraints" that will be in place in the years ahead.

It also said that social protection spending should begin to reduce as the economy recovers, suggesting means testing or taxation of universal benefits as a means to make further savings.

The IMF statement said its team saw scope for changes on both the expenditure and revenue sides of the budget, adding that additional measures could be needed if there are any significant changes to international tax rules.

It also said that social protection spending should begin to reduce as the economy recovers, suggesting means testing or taxation of universal benefits as a means to make further savings.

The IMF statement said its team saw scope for changes on both the expenditure and revenue sides of the budget, adding that additional measures could be needed if there are any significant changes to international tax rules.

On housing, it welcomed the progress made by banks on mortgage arrears cases, but said the scale of the problem was still growing.

It called on authorities to press banks to either restructure or dispose of loans in prolonged arrears, including those involved in legal proceedings.