In the meantime, however, homeowners may find it more difficult to get a mortgage and may find that their mortgage costs them more.

According to Moneyfacts, the financial comparison website, the number of mortgage products available for purchase and buy-to-let purposes fell from 7726 to 5700 with the smallest lenders hit hardest.  Denise Harvey, a mortgage analyst at moneyfacts says: "Over the last two weeks, lenders have been even more ruthless in withdrawing products from the market and/or tightening their criteria.

"Until a couple of weeks ago it seemed that smaller building societies had escaped the worst. By funding their lending through deposits, they appeared to be immune from the problems facing the money markets. The last two weeks, however, have shown a very different story. 

"Instead of increasing rates or tightening criteria, the smaller building societies.......have either been withdrawing their products from the market completely or restricting their lending to direct business or local areas.  Due to larger institutions increasing rates and becoming more reluctant to appear competitive, smaller lenders have seen an increase in demand; something they neither want nor can cope with.

"Traditionally, local building societies have attracted the majority of their business from the local area. In order to maintain presence and competitiveness in that area, they are having to close their doors to those from outside the region who are unable to secure a mortgage from the larger lenders".