According to the annual world retail banking report from Cap Gemini, Unicredit and EFMA, mortgage lending has “exceeded reasonable limits” with the volume of debt running at 86% of gross domestic product (GDP), or about £1,200bn.

The report recommended 60% as a sustainable upper level. Mortgage growth shrunk by -26.6% in the UK between the first half of 2007 and the same period in 2008.

The US is even worse off with the value of mortgage debt at 104% of GDP. The report said the “main explanation lies in the uncontrolled increase in housing prices”.

Despite the rise, mortgages remain a “loss leader” for banks in many countries – including the UK – as competition caused net interest margins globally to shrink from 1.33pc to 0.8pc between 2003 and 2007. Although margins are recovering, funding costs, greater default risks and tight regulation will restrict profitability in the years ahead.

First time buyers and borrowers with poor credit profiles could be casualties of a reform of mortgage practices.

The report adds that banks will have to ‘develop cross-selling capabilities over the next five years to make mortgage lending profitable. Only a few do what is needed to succeed today. Mortgage specialists’ ability to survive on their own is questionable.’