The remarks by Norwich and Peterborough Building Society (N&P) chief executive Matthew Bullock will give renewed hope to thousands of home buyers desperately searching for a mortgage.

Lenders have slashed the number of available mortgage deals as the amount of money the banks have been able to secure to support them has dried up in the wake of the credit crunch.

Experts say there are no longer any 100 per cent mortgage deals available from any lender. There are just 241 mortgage products available that will be lent to people with only a five per cent deposit – a quarter of the 963 products that were available in July before the credit crunch hit.

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Mr Bullock, who last year oversaw a 20 per cent rise in N&P profits to £24.3 million, said: "The mortgage market should return to normal by the end of the year, but banks will still require large deposits."

His comments come shortly after Bank of England governor Mervyn King announced the creation of a £50 billion fund for high street banks to dip into in a bid to get mortgage lending on the move again.

Mr Bullock said: "The Bank of England has said to the high street banks that it will provide the £50 billion, but it expects the banks to also look to shareholders to raise money as well.

"The bank's action should help ease the situation. I expect the availability of mortgages to improve but the higher prices that we now see being charged to get those mortgages will not change.

"House prices are falling and will continue falling, and I think first-time buyers will find that houses that were out of reach pricewise will become affordable although they will still need good-sized deposits.

"The availability of funding should improve and by the end of the year it will become a more normal market."

But Mr Bullock also warned that the bank's action would not prevent an economic slowdown.

He said: "We have still got rising inflation caused by increasing oil and food prices.

"The Bank has specifically said the standard of living will fall over the next 18 months, that wages will not go up and that borrowing costs will be higher."

Peterborough Chamber of Commerce chief executive John Bridge said: "What annoys people is that the financial sector has been irresponsible in its lending.

"We have gone from one extreme of there being plenty of money available to the other where the flow has suddenly been cut off.

"The banks need to think creatively about how people can easily obtain mortgages. The ordinary man and woman should not be caused difficulties by a problem that is of the banks' making."