Cheltenham & Gloucester joins lenders' retreat from no-deposit mortgages

Cheltenham & Gloucester will tell homebuyers today that they must put down a minimum deposit of 10% if they want one of its mortgages, as the clampdown on lending gathers pace.

The change means a typical first-time buyer in London will have to stump up almost £25,000 to obtain one of the company's home loans.

C&G - owned by Lloyds TSB - is one of the biggest lenders to rein in its lending in response to the credit crunch and the slowdown in the housing market.

On Monday it emerged that Nationwide was insisting on a deposit of at least 25% if borrowers want access to its best rates, though its minimum deposit is unchanged at 5%.

In the past few days all six lenders in the 125% mortgage market - which offered first-time buyers the chance to borrow more than the value of their new homes - have withdrawn their products.

Until last night, C&G was prepared in some cases to lend up to 100% of the value of a property, but from today it will only lend up to 90%.

The Lloyds TSB mortgages brand has cut its maximum loan-to-value from 100% to 95%. A spokeswoman said the reason for the differential was that the vast majority of the lending by the Lloyds TSB brand was to the bank's own customers, and it therefore has a more complete picture of their financial affairs.

She said the bank had always taken a prudent approach to lending, and added that it had never been a major player in the high-loan-to-value market. "Only 1.7% of our business is 95% and above, and our current [average] loan-to-value for new business is 63%."

Last month it emerged that Alliance & Leicester and Britannia building society had both doubled the minimum deposit demanded from first-time buyers from 5% to 10%.

This latest move is another blow for buyers struggling to get on to the property ladder. Trying to find the cash for a deposit is regularly cited as the toughest hurdle, so the increase in deposits is likely to deter buyers in a property market that is already slowing markedly.

David Hollingworth, at mortgage broker London & Country, said C&G "is a big-name lender which is clearly looking to manage what kind of risk profile they are taking on. First-time buyers will be thinking, 'Ouch.'"

However, he added he did not believe that the demise of the 95% mortgage was imminent. "I think we are a distance yet from saying 95% mortgages no longer exist."

Leeds building society has just launched some deals that go up to 95% without imposing a higher lending charge.

Until this week, buyers with a deposit of 10% or more were able to get Nationwide's best mortgage deals. But the society has changed its lending rules so that the cost of borrowing for loans of between 75% and 95% of the value of a home has risen by 0.2 percentage points, wiping out the impact of the last cut in the Bank of England's base rate. The rise only affects new borrowers.