Hi Padraig
A very interesting point which I had not seen raised before.
During the bubble, banks which were initially prudent, found that they were doing no lending. If they had moderate LTVs, customers went to banks which had reckless LTVs. When one started doing 100% mortgages, the others had to follow. I have been told that one bank lobbied the Central Bank to block 100% mortgages. When they got nowhere, they had to get into that market.
Likewise, if a prudent borrower decides , of their own initiative to save 20% of the house price before buying, they will keep getting outbid by people who are prepared to borrow 92% if there are no restrictions.
So maybe forcing prudence on everyone is a good idea.