Millions of homebuyers could struggle to find cheap mortgages for many years to come, Britain's powerful financial regulator has warned.

Hector Sants, chief executive of the Financial Services Authority, said mortgages, loans and other "credit" will be "re-priced" while experts echoed his warning that the days of cheap money are "gone".

His dramatic warning is a red alert to the country's 11.7 million homeowners who have a mortgage - and the millions who are thinking of taking one out.

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In a further twist, Mr Sants said expensive mortgages could be a permanent change.

He blamed the "credit crunch" which means banks and building societies are struggling to borrow cheap money as they did in the past.

Speaking on Radio 4's Today programme, he said: "I don't think markets are ever going to return to the way they were.

"The idea that at some point they will go back to normal is a misnomer.

"The new normal will be different from the way that markets behaved in the past."

Mr Sants welcomed a return by the country's banking giants to "behave more like banks behaved in the past".

It signals a return to traditional banking values when people could not buy a home unless they had saved some money for a deposit.

Over the past few weeks, lending giants have made dramatic changes to the types of mortgages they are prepared to hand out.

All lenders which used to offer "super-size" mortgages worth up to 125 per cent of the value of a house have axed the deals, while others have also put an end to 100 per cent mortgage deals.

In a third clampdown, lenders are forcing people to put down bigger deposits to buy a home - or pay a higher interest rate.

Melanie Bien, director of the independent mortgage broker Savills Private Finance, said: "Lenders are struggling to lend on the back of the liquidity squeeze and lack of money available.

"The cost of borrowing has risen as a result, while lenders have also reduced maximum loan-to-values.

"With less money available, they are more choosy, preferring lower-risk business.

"Cheap lending has gone for now but that doesn't mean it won't return.

"But we are unlikely to see a return to the madness of cheap pricing we have seen in the past, but the situation will improve."

Mr Sants's warning echoes a similar alert from Kate Barker, a member of the Bank of England's monetary policy committee.

In a recent speech, she said mortgages could become "more expensive" this year.

Official figures already show the number of mortgages being taken out has dramatically slumped.

Many people are too nervous to buy at today's high prices due to forecasts that prices will fall for the next two years by up to 15 per cent.

Meanwhile the number of mortgages taken out by homebuyers has plunged more than 30 per cent, according to the British Bankers' Association.

In January, just 44,288 people took out a mortgage to buy a home, compared to nearly 65,000 in the same month last year.

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