Bank cuts lending to first-time buyers

Abbey National identified first-time buyers and the buy-to-let sector as particularly risky markets yesterday when it issued a profit warning.

Britain's second-biggest mortgage lender said it had halving lending to first-time buyers compared with this period last year.

Ian Harley, chief executive of Abbey, also said he was "very wary" of lending to customers who wanted to buy a property to let it out. This sector is a key early indicator of the health of the housing market because it is usually one of the first to collapse when property prices fall.

Mr Harley stopped short of predicting a crash, but said the market needed a rise in interest rates to put a brake on the sustained rapid rise in house prices. He admitted he had been "slightly taken by surprise" by the surge in prices, saying: "We expected last year to be the peak, now we think it will be this year."