Since the credit squeeze began in August, the number of mortgages on offer has slumped dramatically as banks have struggled to fund new lending from the wholesale markets. Financial Times

Mortgage brokers estimate that £50bn of capacity has been taken out from what was a £360bn UK mortgage market, as lenders scale back their new business or withdraw from the market.

Northern Rock was the UK’s fifth-largest mortgage lender last year before its crisis caused it to seek an emergency loan from the Bank of England in September. This year the now state-owned bank is expected to do very little new mortgage lending.

The US investment banks that piled into the mortgage market last year using cheap wholesale funding are also withdrawing. For example, Morgan Stanley recently closed Advantage Home Loans, its home-loan operation. Other banks are reducing their mortgage lending because of the difficulties and the cost of funding new growth.