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High loan-to-value lending and cheap rates have not been the only casualties of the turmoil in the UK mortgage market in the last few months. The credit crunch has also meant lenders, focusing on liquidity and volume of lending, have pushed down the maximum loan sizes they are willing to offer to clients.

An example of this shift in borrowing was the high-profile departure of Nationwide from the large loan market.

At the end of April the lender slashed its maximum loan size for new customers by half to £500,000, citing the decision was a "prudent and sustainable" way to manage its business during the current crisis.

Figures from the Council of Mortgage Lenders showed the number of mortgage advances in excess of £500,000 fell by 9.38 per cent in the first quarter of 2008, compared with the last quarter of 2007.

Large loans had been on the increase with advances increasing by 29 per cent last year compared with the previous year, according to the CML.

Richard Stokes, director of product and lender development for The Mortgage Times Group, said traditionally many lenders liked to be associated with high net-worth clients, however, with property prices predicted to fall in the next two years there was cause for concern.

He said with a market putting more pressure on liquidity, lenders were increasingly looking to spread their risks across multiple smaller loans.

Mr Stokes said: "Most commentators predict back-to-back property price falls in 2008 and 2009. Traditionally the property values at the top end are where they are most fickle and with finite lending capacity lenders are increasingly likely to want to spread their risks across multiple loans."

David Hollingworth, head of communications for Bath-based intermediary London & Country Mortgages, said larger loan lenders had certainly not been impervious to the credit crunch.

He said: "The turmoil resulting from the ongoing liquidity crisis has had a far-reaching impact on mortgage rates, most notably pushing up margins. This has been brought about by the rising cost of funds and also by the need for lenders to manage volumes.

"As lenders have a more limited appetite for mortgage business they have concentrated on quality and so the best rates tend to be available to those with a low LTV and often to lesser loan sizes. As for most borrowers, those with large mortgages are certainly not impervious to the credit crunch."

Traditionally, those in the high net-worth market have had significant deposits allowing them to take advantage of the most competitive rates.

However, Mr Hollingworth said with current market conditions pushing rates up in almost all areas of the market, borrowers could not necessarily expect to have access to reduced rate products.

But this shift in the large loan market is not necessarily bad news for advisers, according to lenders.

Research from Bank of Scotland revealed more than a third of advisers have seen an increase in the number of loans in excess of £500,000 in the last three years.

The lender said advisers who worked with high net-worth clients said loans greater than £500,000 accounted for more than 25 per cent of their business.

Mr Hollingworth said despite some loan sizes being reduced, many of the larger lenders had a continued presence in the large loan market.

HBoS, Cheltenham & Gloucester and Abbey would be "well-placed" to take the lion's share of the business, he said.

Mr Hollingworth said: "In addition to the fact that others no longer have the desire to attract large mortgages these lenders have a good track record in providing the service levels required for this type of business.

"As important as interest rate is, it is also vital that the lender offers access to those that are experienced in dealing with that type of large loan business profile.

"Those lenders with established specialist departments for large loans will continue to command much of adviser business and borrowers looking for big mortgages will continue to employ advisers' services to help seek out the best deal in a tougher market."

Ricky Okey, managing director of Abbey for Intermediaries, said it was natural that in the current market conditions lenders were being cautious about not over-exposing themselves in the large loan arena.

However he said Abbey was "committed to this part of the business".

Mr Okey said: "There is great opportunity and growth that can be found in this sector and we are in a good position to benefit from this."

The Mortgage Times Group's Mr Stokes said since the market turmoil began he had seen an increased demand for specialist advice from high net-worth clients.

This was because the clients were looking to find better interest rate deals through more specialist routes such as multi-currency mortgages.

He said: "A robust sales process is critical here as the potential pitfalls are significantly greater than traditional loans. Networks are well placed to design and monitor the framework for the client."

Eric Malchodi, director of credit risk management for Cheltenham & Gloucester, said despite liquidity problems reducing the number of lenders actively competing in the market the large loans market the lender had in fact seen increasing interest from advisers in larger loan products.

He said: "During recent months, the changing market conditions have led some of our competitors to reduce their maximum loan rates. However, at C&G we continue to lend up to £999,999 within our core product range."

Peter Curran, head of distribution for Bank of Scotland Mortgages, said the lender had seen an ongoing demand for large loans from customers.

In the current market conditions lenders had to play to their strengths and offer a proposition that was in line with their strategic objectives for the coming months, he said.

Mr Curran said: "At Bank of Scotland, we consider the large loan market to be a niche that requires a tailored approach from standard mainstream mortgages. Our large loan proposition is not just based on how much we are willing to lend, but about the service we can offer to intermediaries who are introducing these cases.

"Advisers have shown resilience and adaptability in the current climate and I am certain they will continue to do so for the foreseeable future."