HOMEOWNERS in this country have the second highest mortgages when compared with the value of their houses among a group of eurozone countries, according to calculations by the European Central Bank.

Only the Dutch have higher loans-to-property value, according to the ECB's Financial Stability Review for December.

And Irish house prices slowed at the fastest rate among seven eurozone countries analysed for the first half of this year. The ECB research indicates that Irish homeowners' mortgages represent about 33pc of the value of their homes on average. This compares with loan to value of 13pc in France.

The ECB has examined loan- to-value because it fears there is a greater likelihood households will fail to service their mortgage debts if they hold little or no equity in their homes, or even have negative housing equity.

Loan-to-value ratios have shot up because of borrowers have been taking out longer- term mortgages, mortgage interest rates have declined compared with the early 1990s, and banks have eased off on demands that new buyers have large deposits.

The ECB report added that strong house price appreciation over recent years meant that people in the eurozone were borrowing larger amounts, while many homeowners were capitalising on property value gains to release equity from their homes. Younger households tend to have mortgage loans with higher than average loan to value ratios, the ECB report said. Ireland has proportionally more young people than the other six eurozone countries examined in the study.

The ECB said the study suggests it would take a sizeable house price decline in addition to any adverse impact on debt- servicing capacity before banks would incur large credit losses.

Other figures show that Irish house prices rose just 4.3pc in the six months of this year compared with the same period last year. In the first half of 2006, house prices were 13.6pc higher than a year before.

Although all the countries share the euro interest rate, that rapid Irish slowdown compares with smaller falls from 13.9pc growth in 2006 to 7.4pc in France, and from 11.4pc to 6.5pc in Spain.

Over the past four years, house prices rose faster in Spain, France and Belgium than in Ireland, although the categories of housing are slightly different.

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