Teachers applying for loans of up to pound;50,000 to buy property in south London are being turned away because the budget for the key-worker living initiative has already been allocated.
The revelation comes amid fresh evidence of the difficulties many teachers face in affording their own homes and as the Government announced a new scheme to help first-time buyers.
A report by Halifax bank shows that teachers in three-quarters of British towns cannot afford their own home. In 2001, the figure was 34 per cent.
Attention has so far focused on problems in the South-east, but the survey found that houses in Scotland and the north of England are now also out of reach for many teachers.
This week Gordon Brown, the Chancellor, announced a multi-million-pound scheme in which the Government and mortgage-lenders fund up to half the cost of buying a home for young couples.
Some 100,000 first-time buyers are expected to benefit from the scheme, which would allow them to increase their stake in the property as their fortunes improved.
The latest announcement comes a year after the launch of the key-worker living initiative, and amid fears that the high cost of housing in the South-east is contributing to teacher shortages.
More than 1,700 teachers have so far benefited from the scheme, under which teachers can apply for loans of up to pound;50,000 to help them buy their own homes. A small number of pound;100,000 loans are also available for teachers identified as possible education leaders of the future.
A spokesman for Tower Homes, the firm responsible for administering the scheme in south London, said it had allocated all the money available in 2005-6 for loans of up to pound;50,000. There is still funding available for the Pounds 100,000 loans.
Teachers in Hertfordshire also report being told that money for the scheme had run out, although this was denied by Lea Valley Homes, the firm that administers the scheme in the region.
A spokeswoman for the Office of the Deputy Prime Minister said no extra funding had yet been found, but that the Government hoped to be able to help those on the waiting list.
"Demand has been so great that zone agents in some areas have already commmitted their allocation," she said.
"It would be unfair to raise expectations which may not be met by continuing to process and approve applications."