A mortgage lender is offering a discount of 8 per cent to homeowners who repay their mortgage early in a new sign of the turmoil gripping the mortgage market.

Edeus, a sub-prime lender, is waiving all exit fees and early redemption penalties for some borrowers who pay off their mortgage, as well as accepting between 92 and 99 per cent of the original loan as full payment.

Borrowers offered the 8 per cent discount would have to repay only £138,000 of a £150,000 loan.

The lender is piloting the scheme with 400 borrowers with buy-to-let loans or self-certified mortgages, but it said that it would extend the scheme to sub-prime borrowers if it was a success.

Alan Cleary, the managing director of Edeus, said that in the wake of the credit crunch the lack of appetite among banks and other investors for mortgage-backed securities and whole loan books, on which the lender relies, had forced down the cost of such deals.

“The securitisation market is dead and we are getting increasingly lower prices for loan books, so we thought we could get more money in by going straight to the customer,” he said.

Many sub-prime lenders depend on selling on the mortgages they offer rather than retaining them on their balance sheets and making money from the interest payments.

It is likely that other lenders will be watching Edeus’s scheme closely. Kensington, another sub-prime lender, said that it had no plans to follow suit but called it an “interesting development”. Db mortgages, owned by Deutsche Bank, refused to comment.

Experts pointed out that the lack of funding in the mortgage market, particularly for those with blemished credit records or with little equity in their homes, could make it difficult for some borrowers to repay their loan as rival lenders may refuse to accept their custom.

Mel Bien, director at Savills Private Finance, the mortgage broker, said: “The lack of mortgage funding has made lenders more circumspect about offering loans, with many demanding hefty deposits from new borrowers.”

Mr Cleary said that the discounts being offered were being calculated to help borrowers to extend their equity, which could improve their chances of securing another deal.

This week Barclays announced that it was cutting mortgage rates by up to 0.35 percentage points, but only for borrowers with at least 40 per cent equity in their homes.

Edeus’s move came as new figures revealed a sharp drop in the number of homes sold in June. The number of transactions nearly halved to 77,000 last month, down from 140,000 in June last year, according to HM Revenue and Customs.

However, estate agents said that there was a slight rise in the number of first-time buyers in June. Figures from the National Association of Estate Agents showed that 11.8 per cent of sales were by first-time buyers, up from 10.6 per cent in May.

Meanwhile, the City watchdog yesterday outlined its plans to crack down on mortgage brokers that commit fraud. The Financial Services Authority, which has banned 17 brokers in the past year for mortgage fraud, said that it would be visiting hundreds of broker firms in the coming months. It comes as Which?, the consumer group, prepares today to publish a survey claiming that fewer than one in ten mortgage advisers are providing acceptable advice.

Paragon, the buy-to-let lender, said yesterday that it had opened its books to potential bidders, in a further sign that investors’ interest in the British mortgage sector is increasing. Blackstone Group, the private equity firm, is in talks with the Sollihull-based lender, while TPG Capital, the private equity firm that walked away from a deal with Bradford & Bingley, is thought to be weighing up an approach.