Homeowners are at risk of paying nearly 35 per cent more in monthly interest payments after the cost of a two-year fixed-rate mortgage rose above 7 per cent.

Borrowers now face interest-only repayments of £875 a month on a £150,000 two-year fixed-rate loan, according to new research from Moneyfacts.co.uk.

Just two years ago, monthly repayments on the same loan on a 4.59 per cent deal that was available at the time would have been 34.3 per cent lower at £574.

Today's data provides yet more evidence that lenders are making it more difficult for first-time buyers to get on the property ladder.

The British Bankers Association revealed that mortgage approvals had fallen 20 per cent from 34,752 in April to 27,986 in May, below a six-month average of 40,570.

Compared to last May, mortgage approvals fell by 56 per cent over the year.

Today, Woolwich, Barclays' mortgage lending arm, announced that borrowers must have a deposit of at least 20 per cent of their property's value to secure its most popular mortgage deals.

Bank of Ireland also announced the sudden withdrawal of its entire mortgage range today. It will introduce new rates of up to 8.09 per cent tomorrow.

Experts said that the Woolwich had been inundated with demand from borrowers with nowhere else to turn and was responding by decreasing its loan-to-value limit from 90 per cent to 80 per cent on some fixed rate deals.

A borrower with a property worth £200,000 would now need at least £40,000 worth of equity to be eligible for the rates.

The move will cut off about half of all mortgage borrowers, as the median loan-to-value is 80 per cent, according to the Council of Mortgage Lenders.

It follows similar attempts to pare down the amount of applications from borrowers seeking bigger loans as lenders grow increasingly nervous about falling house prices and introduce stricter criteria.

Over the past nine months, lenders have been passing on the increased cost of swap rates, the money markets that determine fixed rate lending in the form of higher rates to borrowers, after the credit crunch made banks more reluctant to lend to each other.

Expected increases in the Bank of England base rate are now also being reflected in the mortgage rates on offer to borrowers.

Darren Cook at Moneyfacts.co.uk, said: "Any increased cost to lenders in arranging the funds on the money market is passed on to customers. Lenders are also taking an increased margin on top as they price their products for risk."

Aaron Strutt at Chase De Vere Mortgage Management, said: "Borrowers need to be quick if the want to secure a deal."

Money Central: Are house prices heading for a 1990s-style collapse?