The mortgage market kicked off the year in a buoyant mood, with a 22% increase in the number of mortgage products, and several new lenders joining the fray. Just this time last year, the UK’s biggest home lender HBoS, came under fire over its plans to launch a controversial 125% mortgage - a loan that would significantly outstrip the value of the home you would be borrowing against. In more recent months, however, lenders have grown wary. HBoS seems to have undergone a complete turnaround, this month warning that mortgages are becoming more expensive for borrowers and less profitable for banks, and predicting a further slowdown in the market next year.

Much of this shift can be placed at the doors of the beleaguered US sub-prime mortgage market, whereby lenders would offer mortgage products to those considered higher-risk - for example, those with a poor credit history or low incomes. The resulting ‘credit crunch’ has had repercussions for banks and building societies over here, with personal loans costing more and the number of mortgage options seemingly plummeting.

Over the past three months, the number of mortgage products available to British borrowers has fallen by 40 per cent, as lenders tighten up the lending criteria and withdraw a number of riskier home loan products. Northern Rock, for instance, cut its mortgage range from more than 230 loans to around 70. In addition, dozens of deals disappeared following the Nationwide and Portman Building Society merger. Many other providers have withdrawn their loans worth 100% or more of the property, as well as those available to the self-employed.

Sub-prime mortgages have been particularly affected, with 54% of such home loan products pulled since July and 72% of sub-prime buy-to-let mortgages no longer available. But even people with a great credit history, otherwise known as prime borrowers, may have more of a struggle following a 16% fall in the number of prime residential deals and a 20% decline in the numbers of prime buy-to-let mortgages.

Even in this more uncertain market though, there is a silver lining to this rather dark-looking cloud. Lenders have been criticised for offering amounts to people that they may struggle to repay: the 125% mortgage loan is a good example. Many deals may have been removed from the shelves, but the products that remain are likely to be less risky, not just for the lenders but for you too.

Even if these latest changes have made you worry about whether you can successfully apply for a mortgage, perhaps this is just the push you needed to get your finances in order to improve your credit worthiness to lenders. There are simple steps you can take too: establish a consistent record of paying your bills on time; and try and build a good employment history - or be ready to explain why you might have had breaks in your career (for example, if you normally work in sales and/or on short-term contracts). Work on lowering your existing debts so you have a reduced debt-to-income ratio and, finally, get saving. With interest rates rising, there has never been a better time to save - if you haven’t already built a nest egg, look around for the best savings accounts, and start now. Take all these steps and you will find you will have a far better choice of mortgage products to pick from.

And, of course, when you come to looking at particular mortgages, take your time. Compare products and don’t settle for anything until you’re sure it’s the best deal you can get for the type of home you want to buy.