The value of mortgage drawdowns in Ireland grew 40% year-on-year in the first quarter, the latest government statistics show. The surging demand is expected to put more pressure on house prices in the country, which is currently posting double-digit growth.

Irish mortgage lending collapsed following the bursting of a property bubble in 2007 and a recovery over the last three years that has picked up significantly in recent months has coincided with a chronic housing shortage throughout the country.

House prices, which had stabilised at an annual growth rate of 4 to 5% last year following an initial rebound, have since accelerated above 10% as an easing of central bank lending rules and a new government subsidy for first-time home buyers added to the recovery.

Mortgage approvals also far outstripped drawdowns in the first three months, with year-on-year growth of 78% to €2bn pointing to further pent up demand among buyers in the European Union’s fastest growing economy.

However, house prices in Ireland still remain 31% below the 2007 peak and Irish Central Bank governor Philip Lane said last week that he did not think the market was showing the same dynamic as a decade ago. He said the bank’s rules limiting mortgages to 3.5 times a borrower’s income would act as self-correcting brake to prices.