GORDON BROWN wants to ban 100% mortgages as part of a blitz of initiatives designed to save the banking system — including a new bailout with a potential cost of £500 billion.

The prime minister is to ask the City regulator to prevent lenders from offering loans for the full value of a property.

In future, buyers would be forced to find a deposit of at least 5%, even if the property market was booming.

The move will hit first-time buyers hoping to get on to the property ladder. However, last night Brown said: “We want to see the reinvention of the traditional savings and mortgage bank in Britain, making loans on prudent and careful terms.”

The announcement comes ahead of a series of fresh bailouts for Britain’s battered financial system, which could cost the taxpayer as much as £500 billion.

The new measures include:

- Government insurance of banks’ “toxic assets”, with up to £400 billion of risky debts set to be put into a “bad bank”.

- Permission for the Bank of England to begin £100 billion of “quantitative easing” — in effect printing money — to encourage banks to resume lending.

- A cash injection of up to £10 billion for Northern Rock, the nationalised bank, to issue new mortgages.

With the government preparing to announce at least four measures on the economy in less than a week, some ministers privately fear Brown is expending too much energy trying to “look busy”.

In a speech last week, Lord Mandelson, the business secretary, warned there was “no value in trying to create frenzy around these events every day”.

Brown’s move to control home loans closes the door on an era that saw hundreds of thousands of house buyers taking advantage of mortgages of up to 125% as prices soared. All banks and building societies have now withdrawn 100% mortgages, but potential first-time buyers had hoped the deals would return.

The government is presenting the policy as evidence of its determination to end irresponsible lending for good.

A Downing Street source said: “There is a big question over whether it was responsible for banks to have been offering upwards of 100%. The prime minister will be asking the Financial Services Authority to look into whether these loans should be banned.”

Opposition politicians decried it as too little, too late. Grant Shapps, the shadow housing minister, said: “This comes well after the horse has bolted. It was Gordon Brown’s failure of judgment which allowed the credit explosion to get out of control.”

At the height of the housing boom in November 2007, there were more than 150 mortgage products with no deposit, with about a third of prime lenders offering 100% loans. Some, including Northern Rock, offered “cash-back” mortgages of up to 125%.

Ministers are putting the final touches to a £10 billion refinancing of Northern Rock, which last week marked the first anniversary of its nationalisation. The plan is to hive off its remaining risky assets into a separate vehicle, while the Treasury will inject money into its mortgage business in an effort to kick-start the home loans market.

As Northern Rock prepares to start lending more aggressively, another state-owned bank, Bradford & Bingley, is closing its doors to new business, and warning customers they must look elsewhere once their current deals expire.

On the wider front, Alistair Darling, the chancellor, will tell the Bank of England it can buy £100 billion worth of high-grade assets from banks in return for cash.

The authorities hope this huge flow of liquidity will tip the banks into lending to cash-strapped businesses. However, some economists fear that the unprecedented move to pump more money into the economy could trigger a further devaluation of sterling, already hovering just above parity with the euro.

Darling is also preparing to launch a £400 billion scheme to use public money to insure the “toxic assets” held by British banks, a move aimed at drawing a line under catastrophic corporate losses. Lloyds TSB and Royal Bank of Scotland, the two hardest hit lenders, will be the first to sign up to the insurance plan, with each set to place about £200 billion of assets into the scheme. The taxpayer owns a majority of RBS and 43% of Lloyds TSB, which took over Halifax Bank of Scotland.

The blitz of activity comes as RBS, 68% owned by the taxpayer, prepares to unveil Britain’s biggest corporate loss of £28 billion. It will axe 20,000 jobs worldwide, with half likely to go in the UK.

Although RBS has agreed to curb its bonus payments, other banks still fully in private hands but which benefit from the government’s wider measures to support the banking system are expected to announce billions of pounds in payouts to directors and staff over the next fortnight.

Michael Geoghegan, the chief executive of HSBC, is believed to be in line for a bonus of more than £1m in cash and shares, while Barclays will pay bonuses that industry sources expect to be worth more than £1 billion.

Times Recommends

• Shrinking violet Gordon turns into raging bull
• Eddie Izzard: 'I keep thinking if I do all these things she'll come back'
• Is sex for the disabled the last taboo?