More than 500 mortgage deals have been removed from the market over the past month, while the price of fixed-rate deals has continued to rise, according to data from financial information company Moneyfacts. It means there are now 4,838 mortgage products available, which is almost 400 fewer than at the start of the Covid pandemic in March 2020.
In terms of rates, both 2-year and 5-year fixed rate deals have gone up for the fifth consecutive month. This means the average 2-year fixed rate mortgage is now 2.65%, the highest its been since November 2015. The average 5-year fixed rate, meanwhile, sits at 2.88%, the highest level since April 2019. Added to this, lenders' average standard variable rate has also gone up, reaching 4.61%.
Why have there been changes in the mortgage market?
Mortgage lenders have reacted to the rises in the Bank of England base rate in December and February, adjusting their prices accordingly. Moreover, with greater economic uncertainty, they are factoring in both an increase in the cost of living, which potentially makes their affordability assessments more challenging, as well as the risk of higher levels of defaults. There is also an expectation across the mortgage market that there will be a shift in demand, with the frenzied activity in the housing market starting to reduce and more people looking to remortgage at higher loan-to-value (LTV) levels.
This economic backdrop means some lenders have tightened up their lending criteria, with some opting to reduce - or remove - products available at certain LTV bands. Other lenders have chosen to remove or suspend whole rafts of their product range, including TSB, which announced it was temporarily pulling its 2 and 5-year fixed rate residential mortgages with £995 product fee, as well as its 10-year fixed products for first-time buyers, movers, shared ownership, remortgage and buy-to-let.
Interestingly, an area that has seen some improvement has been for first-time buyers looking to buy with low deposits. There has been an increase in the number of products available at 95% LTV, with 7 more deals than there were at the start of February.
What do the changes mean for first-time buyers and homeowners?
If you are considering buying a property or remortgaging from your current deal, it is worth considering taking action before there is further tightening in the mortgage market. With a more challenging mortgage market to navigate, it is worth seeking the advice of a good, independent mortgage adviser, who can help you find the best available deal for your circumstances. If you haven't got a mortgage adviser, we like online broker Habito*, which offers independent, whole-of-market advice at no cost to the end user.
You may also be interested in reading our frequently updated commentary of what is happening in the housing market, our predictions on what is likely to happen to interest rates, or our guide to whether now is the right time to remortgage.
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