Smaller mortgage providers struggled to keep up with the biggest forces in the market last year as the UK's five biggest mortgage lenders accounted for almost 75% of all deals.

The Council of Mortgage Lenders (CML) said that specialist firms found it difficult to get funding because when the financial markets dried up they could not benefit from Government liquidity schemes.

Previous trends of bigger providers having their market share chipped away by smaller lenders has been totally reversed now with the share of these groups plummeting from 7% in 2007 to just 2% in 2008.

But the entire market has been feeling the pinch as total mortgage advances reached £261 billion last year, 28% below the £364 billion recorded in 2007. The industry will now hope for a sustained period of consolidation in 2009 to steady the ship.

Lloyds Banking Group held the largest market share of 30% following the takeover of HBOS by Lloyds TSB, advancing £78 billion overall during 2008.

But total lending was well down on the £102.5 billion that was advanced by HBOS and Lloyds TSB combined in 2007.

HSBC became the country's sixth biggest lender during the year, up from the eighth in 2007, after it was one of only three of the top 30 groups to lend more in 2008 than it did during the previous 12 months.

The group advanced nearly £17.2 billion during the year, up from £10.1 billion in 2007, with its market share more than doubling to 6.7% from 2.8%.

Unsurprisingly, nationalised bank Northern Rock was the biggest loser, dropping from being the UK's fourth largest lender in 2007, to the 11th last year, with its market share diving from 8.1% to 1.1%.

The CML said: "Typically, our table of the largest 30 lenders shows only a handful of changes from year to year.

"This year, however, it has a much less familiar look, showing just how much has changed in the last year or so."

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