End of Adverse credit mortgages?

Adverse credit mortgages are coming under increasing scrutiny since the recent credit crunch which has effected the current liquidity markets on both sides of the continent.
An adverse credit mortgage is a mortgage product designed to aid people who have had problems with credit is the past, the lending criteria varied from allowing one or two missed payments to lending money to bankrupts and repossession cases.

They would invariably have high interest rates and lend on a low LTV, loan to value, of the property which ensured high profits for the lender along with security on the property.
Unfortunately clients started having difficulty keeping up with the monthly payments, especially since rates rose in total 1% last year. Even with the recent interest rate cut there are ever more cases in both the US and UK of homeowners being unable to maintain the payments.

What happens when adverse credit mortgage holders want to remortgage?
Last month Kensington, the specialist adverse credit lender, pulled out of the market.
For clients coming off fixed rate mortgage deals onto the SVR, Standard Variable Rate, we may see even more homeowners facing repossession due to higher monthly payments.
Its put the whole industry in a catch 22. One the one hand adverse credit lenders need to tighten their criteria to ensure future borrowers are of lower risk. One the other hand homeowners coming off fixed rate mortgages may find it difficult to find an adverse credit lender prepared to take on the old terms.

Does this mean the end of adverse credit mortgages?
Whist there must be a re-evaluation of the lending criteria used by the likes of Kensigton we must also remember that stopping the money is not going to solve the problem, as we can already wittiness with the current LIBOR rate at an all time high and the effect this is having on lenders such as Northern Rock.