Robert Sinclair, Director at AMI, said: "This artificially low interest rate will have to rise at some point in the future to more closely reflect the true cost of money and the returns required by investors.
"AMI remains concerned that many potential first time buyers are being frozen out of the housing market by the lack of available mortgages.
"We would encourage Government, the Treasury and the Bank of England to work with the FSA to encourage a controlled return of greater funding which would allow good building societies to return to the market with competitively priced products at higher loan to value percentages.
"Increased competition is required to ensure that consumers get good deals. Most mortgages are being funded by only six lenders currently and this is not conducive to good consumer outcomes in the longer term."
