I think trade down means more of price and what is sustainable, going forward, rather than the exact size of the house. It makes sense for the bank to see you in a sustainable mortgaged property, rather than stuck in negative equity and availing of interest only payment periods.
Like you, we too are waiting for A.I.B to come out "aggressiveley with products to the property market" as promised last month. I phoned up A.I.B this morning and the lady who answered assured me they are on the way, and just awaiting approval from the central bank.