Lenders have withdrawn almost 2,700 mortgage deals since the beginning of March, reducing borrower choice by close to 50 per cent, Moneyfacts analysis revealed.
At 1 August, there were 2,526 mortgage products on the market, a drop of 2,696 since 1 March and a 202 product decline month-on-month.
And as banks’ mortgage ranges shrink, interest rates have begun to creep up.
Both the two- and five-year fixed average rates for all loan to values (LTV) have increased by 0.09 per cent since the beginning of July, now 2.08 per cent and 2.34 per cent respectively.
Rates in the higher LTV tiers have increased more than those in the lower brackets.
The sharpest climbs can be seen at 85 per cent LTV, with the average two-year fixed rate increasing by 0.21 per cent this month, and the five-year equivalent climbing by 0.23 per cent, now at 2.32 per cent and 2.57 per cent respectively.
Rates remain low
But compared to August 2019, rates are still low. The overall two-year fixed rate for all LTVs is 2.08 per cent, 0.41 per cent lower than it was in August of 2019.
Five-year fixed deals, now priced at 2.34 per cent on average, are 0.50 per cent lower this month than a year earlier.
Eleanor Williams, spokeswoman at Moneyfacts, said: “Until there is more certainty regarding the economic outlook and clarity around risk, which may well not become clear for some months particularly until the government furlough scheme winds down at the end of October, it seems unlikely that the mortgage sector will bounce back to the levels of availability that we saw six months ago.”
She added: “Those who have been waiting to see how the market moves may want to consider pursuing a new deal now and lock into a low rate before they potentially climb further.”
Last week, the Bank of England voted unanimously to keep the base rate at 0.1 per cent and noted that banks had begun increasing rates on higher loan to value deals, where there is less competition, to rebuild squeezed margins.
Samantha Partington is a freelance trade and consumer journalist writing about property and personal finance. Previously she worked worked for the Daily Mail and Property Week. She is the former deputy editor of Mortgage Solutions and editor of Specialist Lending Solutions.
Before becoming a journalist, Samantha worked as a mortgage broker and latterly for a mortgage, bridging and secured loan lender. Samantha is CeMAP qualified. Follow her on Twitter @SamJPartington1.