Lloyds TSB has become the biggest lender to refuse mortgages to buyers who do not have a 10 per cent deposit.

From today, Cheltenham & Gloucester, which is part of the group, will no longer offer more than 90 per cent of the value of a property. Experts fear that other lenders will do the same, making it impossible for most first-time buyers to get on the ladder.

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 said that it would offer deals to those who had saved 5 per cent deposits through its own bank branches but that these offers would not be available at Cheltenham & Gloucester branches or via brokers.

It said that about £1.7 billion of mortgages on its books was to borrowers with deposits of 5 per cent or less.

Banks have been tightening their lending criteria and raising rates in the wake of the credit crunch.

Just two weeks ago first-time buyers could borrow up to 125 per cent of the value of their home. All lenders withdrew these deals last week. A further 15 lenders have stopped offering 100 per cent home loan deals since the credit squeeze started late last year.

According to Halifax, the average first home costs £175,093. This means that the average first-time buyer would have to save nearly £17,500 to get a mortgage with Cheltenham & Gloucester. Homeowners who have not yet built up 10 per cent equity in their homes will struggle to get a competitive remortgage deal. Alliance & Leicester and Britannia Building Society no longer lend to those who have a deposit or equity worth less than 10 per cent. Royal Bank of Scotland will stop lending to those who have a deposit or equity in the property of less than 5 per cent of its value.

Even first-time buyers who have amassed large deposits are being penalised. This week Nationwide said that it would charge higher interest rates for those who did not have a 25 per cent deposit. Abbey and HSBC already operate a similar policy.

A spokeswoman at Lloyds TSB said that Cheltenham & Gloucester would offer individual deals to customers who did not have 10 per cent equity when they came to the end of their current deals. It said that it would not charge the higher standard variable rate — 7.25 per cent — that usually comes into effect when borrowers come to the end of fixed-term deals.

She added: “Today’s change reflects the competitive environment in which all lenders are operating.”

Ray Boulger, of John Charcol, the mortgage broker, said: “For a lender the size of Lloyds to do this is quite worrying. If we start to see too many lenders restricting loan-to-value ratios it will affect the property market and prices could dip.”

This will put added pressure on an already depressed housing market. The number of house purchases fell by 22 per cent last November, according to figures published yesterday by the Land Registry. Recent data from the British Bankers’ Association shows that the number of loans granted for new home purchases in January was one of the lowest on record.