Hundreds of mortgage deals vanished from the market yesterday, as lenders responded to the ongoing inter-bank lending freeze.

Moneyfacts, the price comparison website, said that around 10 per cent of deals were suddenly pulled, because lenders no longer had the money to finance them. The total number of deals fell by 445 to 3,469

The sudden exodus came as the Government announced it would postpone the release of a long-awaited report by Sir James Crosby, former chief executive of HBOS, into the mortgage market, to take account of the recent turmoil.

The Crosby report was due to be released at the end of September, but is now expected in mid-October. An interim report released in July predicted that the mortgage market would take three years to recover from the global credit crunch.

Landlords were worst hit by this week's upheaval in the mortgage market as the number of buy-to-let deals fell from 662 to 481. Around 85 per cent of buy-to-let deals have been withrawn in the last year while over 60 per cent of residential mortgages have been pulled, according to the figures from Moneyfacts.

Bradford & Bingley, the newly-nationalised bank which was the country’s biggest buy-to-let lender, closed it’s specialist mortgage arm, Mortgage Express, to new business.

Birmingham Midshires, the second biggest buy-to-let lender, and Bank of Scotland, both owned by HBOS, scrapped all fixed-rate buy-to-let deals and raised rates on the remaining tracker products by up to 0.5 percentage points.

Meanwhile Lloyds TSB, which plans to takeover HBOS, also hit landlords with increases to its buy-to-let rates. The bank’s mortgage arm, Chelthenham & Gloucester, will be raising rates on its two and three year deals by up to 0.25 percentage points. Northern Rock also announced rates rises of 0.3 percentage points on buy-to-let deals.

Abbey, Nationwide and Bristol & West (B&W), owned by Bank of Ireland, are expected to raise rates in the next couple of days.

B&W was one of the last remaining lenders to allow rental income to equal 100 per cent of mortgage repayments. Most lenders have now tightened criteria and require that rent represents 125 per cent of repayments.

For instance, a landlord who applied for a £140,000 mortgage with a 6 per cent interest rate a few months ago would have needed to earn £700 a month in rent. Now, a landlord earning £700 a month in rent would only be able to get a loan for £112,000.

The specialist lenders UCB and The Mortgage Works, owned by Nationwide, the country’s biggest building society, also pulled their deals yesterday and are expected to announce new higher rates in the coming days.

In the last two weeks inter-bank lending has all but dried up and the cost of wholesale borrowing to fund fixed-rate deals has increased dramatically, prompting a string of rate rises by lenders last week. It is widely expected that this will continue for the foreseeable future.

Melanie Bien, director of Savills Private Finance, the broker, said: “Lenders have referred to ‘unprecedented’ business levels, which could be because landlords who are coming up to remortgage are panicking, particularly on the back of the news that Mortgage Express is no longer offering new deals. This will leave less competition in the marketplace and less choice, which may ultimately result in higher rates.”

David Hollingworth, of L&C Mortgages, says: "With few new landlords entering the buy-to-let market, the changes are mainly going to hit landlords coming to the end of fixed or discounted deals who will find that remortgage rates are much less competitive.”

Aaron Strutt, of Chase de Vere Mortgage Management, a broker, said: “Lenders are raising rates and cutting products because the last they want is to be bombarded with business and see their service levels suffer as a result.”

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