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The changing circumstances in the global finance market are being passed on to individual lenders in the UK loan market. Terms and conditions are being presented now that would have been unheard of as little as a year ago.

For example, a growing number of mortgage lenders are restricting home loans to customers outside certain geographic areas or are capping the maximum amounts homeowners can borrow at £350,000.

Nationwide, one of the UK’s biggest lenders, has said that it will stop lending to first-time buyers who want to take out self-certified mortgages where proof of income is not required. It is also stopping lending to all first-time buy-to-let landlords. In addition Nationwide, which lends to these specialist segments through its two divisions Mortgage Works and UCB, is capping the maximum it will lend to any borrower taking out self-certified mortgages to £350,000.

For buy-to-let landlords it is capping the loan per property to £350,000 and it has signalled it is less willing to take landlords with large property portfolios of more than £1m.

Other smaller building societies are not lending to customers who are outside a certain geographic area. Holmesdale Building Society has restricted its lending area to Surrey, Sussex, Kent and Hampshire. Melton Mowbray has restricted its lending area to business within a 50 mile radius and financial advisers within 30 miles. Newbury Building Society has also restricted its lending area to surrounding counties only.

A number of other building societies, including the Bath Building Society and Earl Shilton Building Society, have temporarily withdrawn their entire product range except for their standard variable rate mortgages to avoid being swamped by inquiries

Meanwhile, new research from Protiviti, the independent risk consulting company, reveals that mortgage brokers expect the situation in the residential mortgage market to deteriorate. Indeed, some 85 per cent believe that many people will find it difficult to find a mortgage this year.

Some borrowers have agreed mortgage deals only to see them disappear from the market hours before completing the applications. The root of the problem is unprecedented volatility in the wholesale markets, which is making it more expensive for banks to obtain funding.

It is not just the fact of these changes but the speed at which they are taking place that is significant. Banks are withdrawing from positions at speeds anyone who has waited for a cheque to clear would have thought impossible. It will be interesting to see how this situation develops over the next few months.

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News is emerging of exactly how Northern Rock will operate now that it is in Government hands. The ‘troubled lender’ has announced that it will cut a third of its staff and reduce mortgage assets by half, leaving current borrowers out in the cold when their deals expire.

The bank is expecting to cut just over 2,000 from its workforce by 2011, in an effort to help repay a £25 billion emergency loan Northern Rock was forced to borrow from the Bank of England last September to stop it going bust. The bank’s management hopes to pay back the loan in three or four years.

Northern Rock has said it is aiming to reduce its current loan book, which is worth £100 billion, to around £50 billion by selling off the mortgage assets to other lenders or by simply declining to offer new loans to existing customers.

The bank has said it will continue to offer prime mortgages to customers, but it will not give unsecured loans and those customers whose mortgages have come up for renewal are being encouraged to seek deals from alternative mortgage providers.

Ron Sandler, executive chairman at Northern Rock, denied that Government support gave the bank an unfair advantage over other rival mortgage providers. ‘We recognise that we’re supported by the Government and we don’t wish to abuse that support by competing unfairly. We’ll ensure we strike a sensible balance. Things that are being said aren’t always accurate. Our headline rates are between 6 per cent and 6.25 per cent and that’s well within the basic band’.

Northern Rock said today it will work ‘sensitively’ with its staff and Unite, the union, ‘to minimise the extent and impact of job losses‘.

However, Unite said it will oppose any compulsory redundancies and is seeking assurances that Northern Rock’s workforce will be reduced through voluntary means only. It would seem that controversy shows no signs of leaving Northern Rock any time soon.