Over the past year, the British mortgage market has changed beyond recognition.

Just 12 months ago, a borrower with a poor credit history could secure a low interest mortgage for 125 per cent of a property’s value.

Now, the same borrower would be shown the door by the industry’s 158 lenders.

Even the relatively well-off, with thousands of pounds worth in equity, are being squeezed by higher rates.

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The most competitive two-year fixed rate at the beginning of August 2007 was 5.39 per cent with a £999 fee. Now, the best deal is 5.98 per cent, with a fee double the size at £1,998.

On a £150,000 loan, this amounts to an extra £96 a month.

Since last August, lenders have performed a 180-degree turn, from a welcoming, liberal lending policy to stringently risk-averse and conservative.

The volte-face has created a vicious circle of falling property prices, and therefore even tighter lending rules, fewer deals and higher rates.

The number of mortgages available has shrunk by two thirds in the last 12 months, from 13,027 to 3,476, while lenders offering two-year fixed rate deals has fallen by 25 per cent.

Sub-prime deals, granted to borrowers with a poor credit history, have virtually disappeared. Those that remain have been left charging borrowers extortionate rates of 8 per cent or more.

First-time buyer deals have become similarly scarce and expensive, as lenders have abolished deals for more than 95 per cent of a property’s value and added a hefty premium to those worth more than 75 per cent.

Fees have also gone up, from an average of £800 at the beginning of 2007 to £1,000 now, prompting a warning to lenders in June from the Chancellor Alistair Darling.

At the same time, amateur buy-to-let landlords have also suffered.

The amount of rent required to cover a landlord's mortgage repayments has risen from 100 to 125 per cent, while fees on the deals have risen from £1,000 to around 1.5 per cent - which works out as more expensive on any loan bigger than £66,000.

But borrowers are not the only casualties.

The credit crunch has claimed six lenders, according to the Council of Mortgage Lenders and 4,000 mortgage brokers, the Association of Mortgage Intermediaries estimates.

While the Bank of England's £50 billion Special Liquidity Scheme was welcomed in April, it has made little difference to borrowers and is really only now beginning to show small signs of filtering down. Libor, the rate at which banks lend money to each other, has fallen by 0.35 per cent over the year to 5.78 per cent.

Nevertheless, Libor is way above the 5 per cent base rate and banks, nervous of following in Northern Rock's footsteps, have hoarded spare cash rather than using it to finance lower rates on loans for customers.

Darren Cook, mortgage specialist at Moneyfacts.co.uk, said: “This time last year, competition was rife with loss-leading deals. Banks thought their money was safe because of property price inflation. Now, greater margins have been allocated to cover the increased probability of defaults.”

There is evidence that a recovery may have begun.

The average two-year fix peaked at 7.08 per cent last month, and has since fallen back down to 6.9 per cent. However, there is little hope that lenders will again offer the kind of generous deals that fuelled the decade long housing boom

David Page, of Investec, said: “We are not expecting that better mortgage availability will be enough to resume pre-crunch activity levels, but time is a great healer.”

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