Mortgage product choice falls as rates continue to rise: Moneyfacts

Following 15 months of improvement in the level of product choice for borrowers, February sees mortgage availability fall, reducing by 38 deals to 5,356. However, when compared to two years ago, there are currently 280 more deals on offer than in February 2020.

Continuing the trend for a fourth consecutive month, the overall average two and five-year fixed rates both rose. The average two-year fixed rate for all LTVs has increased by 0.06% to 2.44%, and the five-year equivalent experienced a 0.05% rise to 2.71%.

Additionally, the average shelf life of a mortgage product has increased 50% in the past month. At 42 days in February, prospective new borrowers had 14 days more to secure their chosen deal than they had in January.

Eleanor Williams, finance expert at Moneyfacts, said: “Product numbers in the residential mortgage sector have dropped for the first time since October 2020, reducing by 38 to 5,356. Such a small month-on-month reduction in numbers, rather than a cause for concern, could potentially be a sign of the market returning to a level of stability after a tumultuous couple of years. There are in fact 280 more deals than were on offer in February 2020 before the onset of the pandemic.

“While fixed rate mortgage pricing is not intrinsically linked to changes in the Bank of England base rate, prior to the decision to double base rate to 0.50% last week, we had recorded increases of 0.06% and 0.05% to the average overall two and five-year fixed rates between January and February. At 2.44% and 2.71% respectively, following four months of consecutive rises, these rates are the highest they have been since August 2021 (2.52% and 2.75%). The 60% LTV tier saw the largest monthly rises, with the two- and five-year averages going up by 0.09% and 0.08% to 1.82% and 2.06% respectively. In fact, since October the lower LTV average rates have far outpaced the overall average rate increases as providers seem to have made their most competitive pricing decisions in the top LTV brackets of late.

“Prospective new mortgage customers may see that the average shelf life of a mortgage product rose from 28 days to 42 days in February, which meant that those looking to secure a new mortgage before potential further rate rises had more time to choose a product. This could suggest that lenders had already made many of their re-pricing decisions in anticipation of the base rate rise in December 2020 and therefore January saw fewer updates made. However, conversely, this lull in activity could be a reflection of lenders holding back on re-pricing decisions in advance of last week’s move, and so it may be a different story next month."