SUBPRIME LENDER Stepstone will stop taking on mortgages from today.

The IIB Bank-backed business has written to its brokers nationwide telling them that it is "suspending" taking on new business from today. It will continue to administer the €100 million that it already loaned to Irish homeowners since it began trading in April of last year.

Lehman Brothers-backed Stepstone did not comment yesterday, beyond confirming it is will suspend taking on new business.

Operators in this sector are seeing their margins come under pressure, as the cost of borrowing on global wholesale money markets has risen dramatically.

Typically, mortgage lenders like this borrow funds that they loan to home owners and buyers at wholesale rates from other banks and institutions. They then loan it out at a higher rate of interest than that required to service the debt. The credit crunch has driven up wholesale or interbank rates and left some institutions unwilling to loan to others.

Lehman provided the finance, which means that it, in effect, did the lending. IIB handled the selling and day-to-day management of the business.

Stepstone targeted homebuyers and owners who did not meet conventional bank criteria for mortgages, and are thus regarded as high risk.In the main, the bank loaned to people with irregular incomes who already owned their homes and were refinancing.

Stepstone is the latest Irish subprime lenders to run into difficulty this year as a result of the credit crunch.

Start, the Republic's biggest such operator, is cutting its workforce by 10 per cent.

Another operator, Fresh, recently said it is evaluating its position as it was unable to get alternative funds. Its financial partner, Credit Suisse, withdrew in November.

Merrill Lynch is said to be reconsidering its involvement with Springboard, a subprime joint venture with Permanent TSB.