Cheltenham & Gloucester, part of the Lloyds TSB group, has become the biggest lender to decline mortgage applications for those who have less than a ten per cent deposit.

It is now feared that other lenders will do the same, making it increasingly difficult for first-time buyers to get a foothold on the property ladder.

Commenting on the development, Melanie Bien, director of the independent mortgage broker Savills Private Finance, said: "If more lenders follow suit, repayments will rise for first-time buyers and for remortgagers who have little equity in their homes as they will have less choice of products."

Lloyds TSB has announced that it will offer special deals to buyers who had saved five per cent deposits via its own bank branches, but such offers would be unavailable at Cheltenham & Gloucester branches or through brokers.

In related news, Nationwide recently stated that it would charge higher interest rates for those who did not have a 25 per cent deposit.

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