It will make it even harder for first-time buyers to get on to the property ladder, while those who need to renew their mortgages are likely to be offered less attractive deals.  Thousands of people could be refused a mortgage or be required to find even larger deposits than previously. It will also underline fears that Britain's household budgets will be squeezed further, increasing the chances of a "double dip" recession.  The Bank of England warned yesterday in its Credit Conditions Survey report that lenders had "tightened credit scoring criteria" over the past six months, and expect to tighten them even further during the next three months. It said lenders had told them they were adopting a more "cautious approach".  Melanie Bien, of Private Finance, an independent mortgage broker, said: "Recently, rates have improved, making mortgage repayments more affordable. But the tougher criteria will mean that people won't be able to get a mortgage at all, or will only be offered higher rates when they remortgage. It is going to get really tough for borrowers."  Financial experts yesterday said the plans were based on flawed logic, as borrowers who were considered vulnerable would be lumped with higher costs. Andrew Montlake, of Coreco, the mortgage brokers, said: "Lenders are getting nervous that unemployment is going to see a rise in the number of borrowers who will experience difficulties meeting their mortgage payments.  "However, if lending criteria tighten and people are unable to remortgage on to attractive new rates, then this will just make the problem worse."  The tougher lending criteria coincide with suggestions from the Financial Services Authority that banks should be even stricter with borrowers and should carry out regular checks to ensure that they can afford interest-only mortgages.  The Council of Mortgage Lenders said yesterday that this would mean that interest-only mortgages would "effectively vanish".  Thousands of buyers took out interest-only mortgages as house prices rose, but the authority is concerned about their ability to repay them in the economic downturn.  Michael Coogan, the director-general of the lenders' council, said: "We do not want to see measures that would effectively regulate them out of the market, and we believe it is possible to address the FSA's concerns, without imposing costs and requirements on lenders and borrowers that are likely to prove to be unacceptable."  There are 3.57 million outstanding mortgages that are interest-only, worth £470 billion. Three quarters of them are understood not to include a planned way of paying off the loan.  Interest-only mortgages are one way borrowers can reduce their monthly mortgage repayments but they must pay off the entire loan in one lump sum at the end of a typical 25-year term.  These borrowers are considered a higher risk and banks have tightened their lending criteria much more on interest-only deals than repayment deals amid fears of defaulting.  Property experts warned that declining house prices were inevitable after Nationwide revealed its latest house price index yesterday.  It reported that typical values rose 0.1 per cent in September to £166,757. This was not enough to halt the drop in annual house price growth, which slid from 3.9 per cent in August, compared with the previous year, to 3.1 per cent in September.  Nick Hopkinson, director at Property Portfolio Rescue, said: "It seems almost inevitable that house prices will fall over the next few months."  Earlier this week Charles Bean, the deputy governor of the Bank of England suggested savers should stop complaining about poor returns and start spending to help the economy.  Analysts said his comments showed a blatant disregard for the financial reality facing households and warned this approach would build up problems for the country in the future.
The Bank of England has warned that obtaining a mortgage is about to become    even more difficult.