Home buyers will be prevented from borrowing more than three times their annual salaries under new mortgage rules to be announced this week.
As part of a wide-ranging package of measures for banking regulation, Lord Turner, the chairman of the Financial Services Authority, will also declare a ban on 100% mortgages.
In all but the most exceptional circumstances, it will become 'normal practice' for loans to be limited to a maximum of three times the borrower’s salary.
Prospective home owners will have to provide a deposit of at least 5%, with many banks and building societies expected to ask for even larger amounts.
The move is in response to Gordon Brown’s request last month that the FSA look into banning risky mortgage lending.