HUNDREDS of thousands of borrowers have been warned that they will be frozen out of the top new mortgage deals as the clampdown on lending by Britain’s major banks and building societies gathers pace.

Brokers have warned that lenders are becoming increasingly cautious. Even applicants with an impeccable credit record are finding it difficult to secure the best deals as the credit crisis worsens.

Borrowers with little or no equity in their homes face big increases in repayments when their existing deals end after Lloyds TSB and the Royal Bank of Scotland (RBS) pulled their mortgages for those with deposits of less than 10% last week.

Banks and building societies are raising their rates for new borrowers. Halifax, the largest mortgage lender, is increasing the interest rate on its mortgages on Tuesday, adding up to £600 a year to the cost of an average loan.

Alan Harper of Moneyfacts, a financial data service, said: “It is not just those with dodgy credit records who are feeling the squeeze now, the credit crunch has well and truly hit mainstream Britain.”

Hector Sants, chief executive of the Financial Services Authority, the City watchdog, added to the sense of crisis last week when he said the era of cheap credit, which enabled homeowners to borrow up to six times salary, was over. In addition, two of the biggest banks, Halifax and Royal Bank of Scotland, warned that borrowers were going to find it more difficult to raise loans.

With about 150,000 people borrowing more than 90% of their property’s purchase price last year, the clampdown is likely to accelerate the housing market’s downturn.

Nationwide reported last week that house prices fell for the fourth month in a row, dropping 0.5% in February. Annual growth has now fallen to just 2.7%, the lowest level since 2005. The number of mortgages approved for people buying a home rose slightly during January to 74,000, but the figure is still the second lowest since September 1995.

Analysts fear the mortgage freeze will make matters worse. Howard Archer, chief economist at Global Insight, a consultancy, said: “It seems highly likely that house-mar-ket activity and prices will continue to be dampened markedly by the combination of stretched affordability and tighter lending.”

Despite the price falls, the Royal Institution of Chartered Surveyors said first-time buyers are finding it harder to enter the market as lenders demand increased deposits.

Cheltenham & Gloucester, owned by Lloyds TSB, has told borrowers that they must put down a minimum deposit of 10% for mortgages. Previously it was willing to lend up to 100% of the value of a property. The change means a typical first-time buyer in London has to raise almost £25,000 to obtain one of their loans.

Nationwide, Britain’s biggest building society, now insists on a deposit of at least 25% if borrowers want access to its best rates.

Melanie Bien of broker Savills Private Finance said: “More lenders are likely to follow suit, meaning repayments will rise for hundreds of thousands of first-time buyers and remortgagers who have diminishing equity in their home.”

First-time buyers Daniel Marks, 28, and Jackie Combine, 30, were fortunate to make it on to the housing ladder with a 5% deposit before such deals began to disappear.

The pair, both financial managers at investment banks, bought in West Hampstead, north London, securing a two-year tracker mortgage at 0.24% above Bank rate at the end of December. However, that deal is now 0.34% above Bank rate and the fee has risen by £504 to £1,499 – which would have added £1,412 a year to their bill.

Marks said: “We felt a massive urgency to find a place and get a good rate. We couldn’t have afforded a 10% deposit.”

Landlords are also feeling the pinch. Figures from the Council of Mortgage Lenders showed a 23% rise in buy-to-let loans last year, but lenders say that since the new year they have been rejecting borrowers.

A buy-to-let survey by Savills, the estate agent, said 24% of investors would be unable to make further purchases. Tim Hague, managing director of BM Solutions, a lender that is part of the HBOS group, said: “We have seen a marked increase in our decline rate on buy to let. There are some borrowers who are going to struggle to remortgage.”

Many lenders are demanding higher deposits for new buy-to-let loans and insisting on increased rent to cover interest repayments.

Woolwich, owned by Barclays, cut the amount it will lend buy-to-let landlords from 85% to 75% of the purchase price last week. BM Solutions will withdraw loans for landlords whose rent covers just 100% of their repayments from tomorrow. New borrowers will have to prove rents cover at least 110% – criteria some will be unable to meet.

Jonathan Moore, of broker Mortgages for Business, said: “Many lenders are reverting to insisting on rental cover of 125% or 130% of the mortgage repayments. This marks a dramatic turnround from the situation just a year ago when lenders were relaxing the rules to make it easier to borrow.”

Dean Jones, 33, a sales executive from Leeds, and his wife, Amanda, invested in their first buy-to-let property in November 2006, with a mortgage from BM Solutions at 4.79%. They have since bought two houses with Paragon at 5.69%, but said the loans were becoming unaffordable.

“The lending criteria and high fees have made it difficult to refinance,” he said.

Rates on tracker mortgages for all borrowers are continuing to rise. Halifax will raise its lifetime tracker by 0.3 percentage points this week to 6.39%.

Simon Taylor, of Chase de Vere Mortgages, a broker, said: “This represents an increase in monthly repayments of £50 fora borrower with a £200,000 interest only mortgage in just a week.”