Mortgage deals for people offering a 10% deposit have almost evaporated from the market, according to new figures. Only 66 deals of this kind are still available, compared with 586 three months ago and 1,197 in February. 

The figures, from Moneyfacts, reveal how the dramatic financial downturn has almost killed off traditional deals for those without large savings. Mortgage brokers say they will not return until house prices level off.  

Deals for those with only a 5% deposit have already all but disappeared, and now the trend is being followed for deals requiring a 10% down payment.  

First-time buyers are likely to be particularly affected by the falling number of low-deposit deals, at a time when homes are theoretically becoming more affordable for them. The Council of Mortgage Lenders recently said that a growing number of young people were having to approach family members for financial help to get on the property ladder.  

Moneyfacts’ figures show that when house prices were at their peak a year ago, there were 1,152 mortgage deals available for those with a 10% deposit. Six months later, the number had fallen to 664, before slumping to 66 on 13 November.  

The move follows a trend already witnessed in offers to those with just a 5% deposit. The number of these deals collapsed from 1,126 a year ago, to just 269 six months ago, and down to only 35 now.  

For those able to offer bigger deposits, notably those with significant equity who are remortgaging, the picture is far less dramatic. Deals which specify a minimum 15% deposit increased from 198 a year ago to 228 now. There was only a slight drop over the same period in 20% deposit deals (from 216 to 189) and 25% deposit offers (from 449 to 421).  

With the market shrinking rapidly, the higher-deposit deals are dominating the limited mortgage scene.  

Banks currently have a limited amount of money to spend and funding they have previously gleaned from people remortgaging during a booming property market has dried up.

Mortgage holders will be glad to hear that the main mortgage lenders have started to cut their mortgage lending rates. The Nationwide, HBOS, the RBS/NatWest group and nationalised Northern Rock will cut their main variable lending rates by the full 1.5% on 1 December.

Lloyds TSB and the Abbey announced similar steps on Thursday. The Bank of England’s official rate was cut from 4.5% to 3% on Thursday. The Libor rate at which banks lend to each other has also fallen since the cut.  

In response the Nationwide is cutting its base mortgage rate by 1.5%, from 6.19% to 4.69%, while RBS/NatWest is cutting its standard variable rate (SVR) by the same amount, from from 6.69% to 5.19%. The HBOS SVR is coming down from 6.50% to 5.00%. The Nationwide, explaining its decision, said its borrowers would be “substantially better off”.  

The banks had been under considerable pressure to cut their rates, from their customers, the media and all major political parties. However, the Council of Mortgage Lenders (CML) warned that the precise level of any reductions would be a commercial decision for each individual lender.  

“The problem banks have got is that they have limited funds and don’t have enough money to give to all the customers who may want them,” said CML.  

Over the next few days and weeks we will see that the banks and building societies will move by anywhere between 0.5% and 1.5% - the individual decisions will be on the basis of assessing what they want for their savers as much as what they want for their borrowers. Almost all tracker mortgages have been withdrawn for new borrowers as lenders consider at what rates to reintroduce them.  

Lloyds TSB, which owns Cheltenham and Gloucester, has become the first to announce that it is to reduce the cost of fixed-rate deals for new borrowers.  

Some deals for those offering a deposit of at least 25% will become 0.3 of a percentage point cheaper from Tuesday.  

Lloyds TSB, HBOS and Royal Bank of Scotland, which owns NatWest, have taken government cash to strengthen their finances.  

One problem, lenders say, is that the key to mortgage costs is not the Bank of England’s base rate but Libor,  the London Interbank Offered Rate, which is the rate at which banks lend to each other.  

The three-month sterling Libor rate - which has the greatest influence on new tracker mortgages - fell from 5.56% to 4.49% on Friday, its lowest level since the end of 2005.  

But the rate remains almost one and a half percentage points above the Bank of England’s base rate - still well above pre-credit crunch levels.  

A number of building societies have said they could take weeks to decide whether to pass on the cut. This would be to consider the effect on savers and to monitor Libor.