The mortgage market will slow down in 2008 as borrowers struggle to keep up with the effects of rising house prices and credit uncertainty, the head of banking group HBOS has suggested.

Predicting that there would a "fundamental shift" in the sector as lenders upped their fees, Andy Hornby argued that borrowers who are stretched to their limit will not be able to fuel continued market growth.

"Looking forward, we can already see that mortgage pricing is starting to adjust to reflect increased wholesale funding costs. Increased mortgage costs to consumers will inevitably lead to a slowdown in the mortgage market," he said.

In recent weeks, lenders including Halifax (part of the HBOS) and Abbey have increased rates on their tracker mortgages as the impact of the credit crunch was felt by businesses across the world.

The news could be of particular concern to the 2.1 million people the Council of Mortgage Lenders says are coming off fixed-rate deals within the next year and a half.

According to the firm, most of those whose product expires before mid-2008 will face a rate increase of between one and two per cent, while those who have to find a new deal after that point are estimated to see a 0.5 to 1.5 per cent increase.