The Bank of England's £50 billion cash injection into the mortgage market has so far not made any difference to the cost of borrowing, the head of the UK's biggest building society said yesterday.

Graham Beale, chief executive of Nationwide, told The Times that a response to the facility "has not happened yet". He indicated that although the Special Liquidity Scheme (SLS), which allows banks to swap mortgage assets for safer Government bonds, would need more time to work, the facility is unlikely to resolve the funding shortages that have blighted the market over recent weeks, pushing up the cost of borrowing for homeowners.

He said: "While it is likely that we will see some recycling of liquidity, the SLS was never a solution in itself. It was never going to be a panacea."

In a bleak analysis of the short-term prospects for millions of homeowners due to remortgage this year, Mr Beale said that a further reduction in the Bank of England base rate on Thursday would be equally ineffective at easing the squeeze, because the cost to banks of lending to each other is still high.

He said: "A cut by the Bank of England won't make any difference. The majority of homeowners are on fixed rate deals, which are determined by LIBOR. This is sitting stubbornly above the base rate, and has not been influenced by the SLS. It is still artifically high."

The downbeat comments came as lenders continued their clampdown on borrowing. Woolwich, the lending arm of Barclays bank, yesterday said that it would no longer offer mortgages to any new borrower who does not have a deposit of at least 10 per cent. Other banks, including Alliance & Leicester, Cheltenham & Gloucester and Nationwide have also reduced their maximum lending limit to 90 per cent of a property's value in recent days.

Meanwhile only one in four lenders have failed to pass on April's interest rate cut to borrowers, according to new figures.

Mr Beale said that as a result of more stringent lending practices, the mortgage market had regressed 15 years because of the size of deposit now required by borrowers. He added that while Nationwide has predicted that property prices will fall by 5 per cent this year, there is "downside risk even beyond that" and homeowners should respond by changing their attitude to property investment.

He said: "In other countries, homeowners see buying a property as a long-term purchase and not about short-term gain. In the UK, we think the opposite way round, although we are starting to see a cultural shift in priorities from the lowest cost to the most sustainable long-term deals."