Woolwich, Barclays' mortgage lending arm, will tomorrow withdraw all two-year fixed rates from the market as rival Nationwide announces plans to raise rates on some its home loans for the second time in two weeks.

Woolwich said it was pulling its two-year fixed home loans to "control customer volumes" and at the same time, nearly doubled fees on its tracker rate deals from £595 to £995.

The move is another blow to potential homeowners who are facing tighter borrowing criteria from banks who have been stung by the impact of the US mortgage crisis as well as high sky-high inter-bank lending costs.

Over the last three years, two-year fixed rates have been the most popular type of mortgage deal on the market.

In 2006, almost 1.5 million homeowners, or three quarters of all borrowers, took out fixed rate deals. The "sizeable majority" of them opted for two-year rates, according to the Council of Mortgage Lenders.

It also emerged today that the Nationwide Building Society, the UK's second largest mortgage lender, ramped up rates by up to half a percentage point for the second time in a fortnight.

Nationwide, the UK's biggest building society blamed "sharp increases in money market rates", and rises by rival lenders for its latest round of changes. It hinted that more rate changes were on the cards as long as the market remains volatile.

The building society reserved its most punitive increases for borrowers with the least equity. Anyone seeking a two-year fixed-rate loan for up to 90 per cent now faces interest of 6.95 per cent, up from 6.45 per cent.

On a £150,000 home loan, the difference in monthly repayments would be £47.

But even the most secure borrowers were not spared, as those with equity worth at least 25 per cent of their property's value were hit with a 0.3 percentage point rise in the cost of a two-year fix, up from 6.25 to 6.55 per cent.

For those who have a deposit of just 5 per cent, rates are now edging dangerously close to 8 per cent, after an increase from 7.55 to 7.85 per cent on one of Nationwide's two-year fixed rate deals. On a £150,000 loan, this takes repayments up to a whopping £1,143 a month.

The increases come amid expectations that the Bank of England will raise the interest rate to keep inflation under control.

They are the latest in a spate of rises that have blighted efforts to remortgage or buy a new home for thousands of borrowers over the last few months.

Last week, Halifax increased the amount of equity a borrower would need to obtain its most competitive deal from 25 to 40 per cent of their property's value. Bradford & Bingley and Woolwich are among other lenders that have increased rates in the past few days.

Matthew Carter, a director at Nationwide, said: "We have seen continued large rises in money market rates together with further competitor activity and, as a result, it has been necessary to increase the rates on our range of mortgages. While markets remain volatile, we can expect to see frequent changes to fixed-rate mortgages across the industry."