The source revealed that fund booking on both its SPML and Preferred brands will cease as of close of business on Wednesday.
All bookings must be received by this point, with packagers given 29 days to compete their cases.
The move sees Lehman Brothers follow Morgan Stanley out of the UK mortgage market and deals a big blow to the non-conforming and packager markets where both brands were still prominent players.
It follows on from an announcement by Lehman Brothers Holdings Inc concerning plans to raise $4 billion of capital from the sale of 4 million shares - a move which saw its share price jump by 18 per cent.
