The Central Bank's new mortgage regulations will slow down the recovery in housing supply and have a strong impact on the building of new homes in urban areas, according to the Construction Industry Federation (CIF).

The CIF also said that the measures will have a knock on impact on rent prices in cities such as Dublin.

Under the new Central Bank plans, the majority of mortgages will require 10% deposits for loans up to €220,000 and 20% for any additional mortgage finance that exceeds that sum.

"We are disappointed that the Central Bank felt the need to take these measures," said CIF Director General Tom Parlon. "The increase in house prices is solely linked to the lack of supply at present. We are not building enough houses to meet the population requirements. This put an upward pressure on prices as competition increased for a relatively low supply. It's simple economics.

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"House building was just beginning to pick up when the Central Bank published their original proposals. That had an immediate impact on the market, causing projects that were progressing to stop in their tracks.

"Until that point we were seeing a slow but steady increase in house building in the areas where there was a demand, such as throughout Dublin. Unfortunately we are now going to see a slow down in the delivery of new homes in these urban areas.

"It is house building in cities such as Dublin that will be particularly hit by these new regulations. The pool of potential house buyers just got a lot smaller as many will not be able to afford the increased deposits. That will mean there will be fewer houses built in these areas.

"Builders will only be able to build houses if there is someone able to buy them at the end of the process. Less buyers means a slower recovery in supply."

He continued: "The reduced level of new house building activity will also impact severely on the rental market. People will now need to rent for longer before they can afford a deposit in places like Dublin. It will simply take them longer to save the increased sum.

"That will put further pressure on the demand for rental properties in Dublin. As we know greater demand with no increase in supply leads to higher prices. That is going to be another knock on impact of the Central Bank requirements."

(CD/JP)