As mainstream mortgage lending continues to slow, the sub-prime market is expected to grow 75% in 2007, according to Davy. Moreover, spreads on mass-market mortgages are starting to contract as competition and rising interest rates force lenders to shave margins to grab customers. But sub-prime spreads remain robust at 300-400 bps, making it an attractive niche in a cooling housing market.

Little wonder industry rumours say several Irish banks are weighing the subprime option.