The Central Bank has warned that lenders must never again be allowed to manipulate the housing market or we risk another property boom and bust.
New research has found that banks helped blow up the bubble by adjusting lending criteria to inflate the availability of home loans. They also made the crash worse by cutting off lending when the market began to fall.
This produced a disastrous effect, strangling the market of any life and accelerating the pace of the house-prices crash.
The new report from the Central Bank warned that any moves to make home loans more accessible must be handled carefully, because changes that appear to increase affordability push up risks in the housing market.
Its economic research found that the house-price bubble and subsequent mortgage crisis of the past decade was driven in part by banks' ability to manipulate so called "affordability" measures for borrowers.
It happened at a time when banks could for the first time borrow on the markets and so lend more than they held on deposit.
Researchers Yvonne McCarthy and Kieran McQuinn looked at mortgages issued by the four main banks here between 2000 and 2011.
They found that in the boom banks allowed a sharp rise in mortgage "income fraction". This is the term for the share of a household's earnings regarded as appropriate to repay the home loans.
This "income fraction" rose from 16pc in 2000 to 25pc in 2007 – meaning a much bigger share of family income was needed to service loans.
"It would appear that when Irish financial institutions were keen to increase the level of credit to the residential property market, they particularly availed of what we label the 'income fraction'," the report said.
Changing the so-called "income fraction" was a main driver of house price rises, the researchers said.
And when the bubble burst and banks rowed back on lending, the opposite effect happened. This sharpened the speed at which house prices fell after 2008, they said.
In the boom lenders also pushed up so-called loan to value ratios (LTVs) – meaning buyers needed a smaller deposit to secure a mortgage.
First time buyers in 2000 needed a deposit worth 28pc of the price of their home, but that was down to 8pc by 2006. Mortgage terms became ever longer over the period.
Home buyers who arranged mortgages through brokers were given even bigger loans relative to income, according to the report called "Credit conditions in a boom and bust property market".
First-time buyers and low-income borrowers benefited to a greater extent than other groups from the easier credit during the boom, the research found.
In many cases it left them unable to keep up with mortgage repayments when their income was squeezed by tax hikes and wage cuts after the boom.