Borrowers, savers and shareholders will all feel brunt

Financial experts said today's government decision to nationalise Bradford & Bingley - taken to stop the bank going bust - was the final nail in the coffin of the "pile 'em high, sell 'em cheap" mortgage market.

They also warned that the bank's demise, which will render the shares of its 850,000 small shareholders effectively worthless, would also mean an end to some of the country's most generous savings rates.

In a further blow, analysts predicted that Bradford& Bingley's demise - which follows last year's government takeover of Northern Rock and the recent emergency buy-up of HBOS by Lloyds TSB - would lead to a poorer deal for consumers everywhere due to diminishing high-street competition.

Dennis Hall, the chairman of the London branch of the Institute of Financial Planning, said: "There is now going to be significantly reduced choice for savers and mortgage holders and that can only mean that it's going to be much harder to find good deals.

"The days of pile 'em high, sell 'em cheap mortgages have disappeared, while savers are going to have to wear out a lot more shoe leather to find good deals and safe places to deposit their money.

"Bradford& Bingley were offering some of the best savings deals on the market and, with such a large chunk of the market now control led by LloydsTSB and Santander, we are now likely to see savings rates coming gradually down."

Mr Hall added that pensioners, many of whom rely on interest on their savings to finance their retirement, were likely to be among the worst affected, as were the small shareholders who received 250 shares apiece when the Bradford& Bingley converted from a building society to a bank in 2000.

Their investments are now likely to become worthless, whereas less than two years ago each share was worth more than £5.

Bradford& Bingley's demise will also be a blow for buy-to-let investors, many of whom took advantage of the formerly generous rates offered to buy additional properties to rent out. The bank was the country's biggest buy-to-let lender - with 18 per cent of the market last year - and one of the prime drivers of the expansion of the buy-to-let sector which now accounts for 1.1 million mortgages, many in London and the South-East.

Most of these mortgage deals are unlikely to be renewed when their terms expire and for those that remain viable rates are certain to rise substantially.

Jonathan Cornell, of mortgage brokers Hamptons, warned that many landlords - including thousands living in London - would come under pressure as generous mortgage deals disappeared.

"There are going to be an awful lot of buy-to-let landlords that are going to struggle when it comes to refinancing their mortgages," he said. The collapse of Bradford& Bingley also spells the end of the demutualisation spree that led to millions of ordinary customers receiving windfalls as a succession of building societies converted into banks.

Of the seven big-name institutions to convert, the Northern Rock has had to be saved by the Government, and the Halifax was recently taken over by Lloyds TSB to prevent it from going to the wall.

Both the Alliance& Leicester and Abbey have been taken over by the Spanish bank Santander, the Woolwich was bought by Barclays and the Cheltenham& Gloucester was swallowed up by Lloyds TSB in 1995.

By contrast, Nationwide, which retained its building society status, has escaped the financial turmoil and remains one of the country's biggest and most successful lenders.