Mortgage availability ‘reduces notably’ as rates rise

March begins with a marked reduction as product availability declines for a second consecutive month, according to the latest Moneyfacts data

Mortgage availability has ‘reduced notably’ as lenders have condensed and revised their ranges over the past month, seeing both the overall average two and five-year fixed rates rise again, according to the latest Moneyfacts data.

The figures show that March begins with a marked reduction as product availability declines for a second consecutive month.

There are 518 fewer products for borrowers to choose from now than there were at the start of February, which is the largest monthly fall in choice since May 2020 (626) during the early stages of the pandemic.

Following the two recent base rate rises, the average two-year tracker rate for all LTVs rose by 0.33% month-on-month to 2.03%.

This is an increase of 0.45% since December 2021 – outpacing the 0.40% overall increase the Bank of England base rate has experienced over the same period.

The average SVR increased by 0.15% to 4.61% this month, the largest single monthly rise on Moneyfacts records, with many providers not yet having amended theirs following the first back-to-back base rate rises since June 2004.

The incentive to switch for those on an SVR remains clear, as the average overall two-year fixed rate remains 1.96% below the average SVR.

Overall average two and five-year fixed rates for all LTVs have increased for the fifth consecutive month, rising by 0.21% and 0.17% respectively. At 2.65% the two-year average is the highest Moneyfacts has recorded since November 2015 (2.67%) and the five-year equivalent of 2.88% is the highest since April 2019 (2.88%).

Eleanor Williams, finance expert at Moneyfacts, said: Borrowers contemplating securing a new mortgage deal may be disheartened to see that rates are continuing to rise this month. Fuelled by uplift across LTV tiers, the overall average two and five-year fixed rates have both continued their climb. However, those coming off a maturing five-year fixed deal from 2017 may be able to secure a competitive deal as the average rate remains 0.05% below where it sat in March 2017 (2.93%).

The level of product choice took a nosedive this month, reducing by 518 deals to leave 4,838 deals for borrowers to choose from. This is the biggest monthly drop in mortgage availability since May 2020 (626) during the mass product withdrawals recorded in the early stages of the pandemic and leaves borrowers with 384 products fewer than were on offer in March 2020 (5,222), she said.

As well as selected product withdrawals, we have seen providers revamp their product ranges with a number pulling whole LTV brackets and in one case temporarily withdrawing their entire range. Processing almost double the number of product updates from lenders this month as in February, this has seen mortgage product shelf-life plummet by 14 days, from 42 to just 28, giving prospective mortgage customers just a short period to secure their chosen deal, she said.

Williams said: This may indicate lenders are focusing their offerings by adapting their range to keep up with the fluid changes and borrower demand.