EBS has said it is very concerned about the housing market and would like to see more radical action being taken by the Government to address the problems in the area.

The society said it was turning away an increasing number of people applying for home loans or offering them less than the sum applied for. In many instances, first-time buyers were having to rely on guarantees or financial help from their parents to get on the property ladder.

Although the society could not identify how many people have been turned down for loans - because such applications are not processed - it said this was happening with far greater frequency than in the past.

"House price inflation is snatching the benefits of economic growth and low interest rates from an increasing number of people," the building society said. "Typically, many of those who moderated their wage demands by reference to low nominal inflation are losing out as house price inflation races ahead of their current or prospective earnings. This is happening to a group for whom the prospects of home ownership should never have been better."

It rejects the argument that it should loosen its lending criteria for those on moderate incomes given the sharp drop in interest rates and lower taxes, pointing out that the increase in house prices in recent years has more than cancelled out the impact of lower rates.

Changing its lending guidelines would only serve to send out the wrong signal to young people, loading them up with debt they can't repay, chief executive Mr Pat O'Reilly said. Instead, the society believes that the provision of a substantial amount of housing in the £70,000 to £80,000 price range is what is needed. This could be achieved by zoning land near public transport such as railway lines and quality bus corridors at higher than traditional densities.