The damage caused by the credit crisis to the mortgage market is irreversible, the head of Britain’s building societies said yesterday. Daily Telegraph, Independent

His warning came on the same day that the Bank of England disappointed homeowners by leaving the base interest rate at 5 per cent. They are believed to have feared inflation would rise if rates were cut again.

Iain Cornish, the chairman of the Building Society Association, said “there is clearly no going back” to a time when mortgage lenders competed to offer deals with the lowest rates possible.

Mr Cornish told the association’s conference: “Whilst we may have seen the worst in the credit and capital markets, it is likely to take 18 months to two years for confidence to return fully, and even those markets that will emerge are very different to how they have been in the last five years.”

Yesterday Alliance & Leicester, the country’s fifth biggest lender, increased the rates on some of its mortgage deals for new customers by up to 0.75 of a percentage point.