Those hunting out a mortgage have seen a sudden change over the past six months from a land of plenty to a time of drought.

The problem has been driven by the ongoing credit crunch gripping the financial markets, which has led to the supply of money available to banks and building societies drying up.

Faced with a lack of funds, lenders are struggling to meet demand and home loans for first-time buyers, home movers and remortgagers have become scarcer and more expensive.

Britain's biggest mortgage lender Halifax hiked its rates for borrowers who have less than a 25% deposit yesterday, a move which followed a similar decision by Nationwide Building Society in February. It said this would reward prudent borrowers, however it will also increase its margins for the 30% of its customers who need loans of more than 75%.

The number of mortgages on the market has fallen by 11,000 since just before the credit crunch hit last summer and the Council of Mortgage Lenders reported recently that members were running out of cash. Michael Coogan, CML director-general, said: 'Demand for mortgages remains strong but cannot be fully met from existing funding.'

Banks and building societies are all being hit by the problems, but not equally. Over recent years, most lenders have increased their reliance on borrowing money from the financial markets to fund mortgages, rather than use their savings base.

Those who rapidly expanded their mortgage books with bargain offers are being hit hardest by the crunch - a problem affecting banks driven by the need to make profits for shareholders more than member-owner building societies.

As a result, banks' mortgage offers have become far less competitive since the start of the year, with building societies offering better rates especially after the influx of savings from the Northern Rock collapse.

But with only a limited amount of savings cash to go round, building societies have also begun to feel the pressure and some have pulled deals due to a rush of business when they approach best buy status.

Smaller building societies are not only more cautious by nature but also unable to cope with a rush of demand. However, those looking for a new mortgage are advised to check with building societies, who are generally offering the best deals at the moment.

If you are a first-time buyer or home mover, then don't rush into a purchase and be aware mortgages have become harder to secure and economists are predicting house price falls.

If you are remortgaging then prepare well in advance. Mortgage rates may be higher now than they were two years ago, but fixed rate mortgages at 5.5% to 6.5% are still available and historically these are relatively cheap. The way to secure the best deal is to have a healthy deposit, a good credit history and solid financial prospects for the future.

Some lenders, such as Nationwide, are only offering their best deals to those with at least a 25% deposit, however others, such as the Post Office, are still making top deals available to those borrowing up to 90% of a property's value.

Before applying for a mortgage check your credit history and make sure there is nothing to put off lenders, such as not being on the electoral roll and wrongly billed missed payments.