Halifax has introduced a new Loan-to-Value (LTV) banding system which will see borrowers with less than 25% deposit charged 0.14% more than someone who has a substantial deposit.

The lender will be introducing, from Monday, three LTV bands replacing its current two groupings. The first band will be for LTVs of 0-75%, the second will consist of LTVs between 75-90%, with the last at 90-95%. These changes will apply across Halifax, Bank of Scotland and Intelligent Finance.

A HBOS spokesperson says that borrowers who give a deposit bigger than 25% of the value of their home will typically be charged 0.1% less. He said: “We will reward customers for their prudence.”

For those borrwers who can only afford to put a deposit of between 10-24.9%, HBOS will charge them 0.14% more. HBOS claims that 70% of its customers already put down deposits of more than 25%.

Meanwhile, the Halifax has just announced that UK house prices fell by 2.5% in March, the biggest monthly decline since September 1992. House prices are now just 1.1% higher than they were a year ago, the slowest annual growth rate for 12 years.

Commenting on the Halifax house price data, Simon Rubinsohn, RICS chief economist said: "The sharp fall in the Halifax house price index in March highlights the growing pressure on the residential market as lenders continue to scale back their activity in the market. Loan to value ratios are being lowered at the same point as borrowing rates are being raised putting increasing pressure on first-time buyers who are having to find ever larger deposits. There is moreover a real risk that year-on-year house price inflation will turn negative over the next month or two. This will compound the negative newsflow on the housing market.

"The Bank of England could respond to growing fears about the impact of the credit crunch and the worsening state of the property market by cutting interest rates on Thursday. Even so, we suspect that any immediate benefit for new home buyers is likely to be limited."