Mortgage Choice Falls - but does it mean housing market in retreat?

After a long period of improvement in the level of product choice for borrowers, February has seen mortgage availability fall for the first time in almost 18 months.

There’s been a drop of 38 in the number of deals available to borrowers, to 5,356. However, when compared to two years ago, there are currently 280 more deals on offer than in February 2020.

“Product numbers in the residential mortgage sector have dropped … 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” explains Eleanor Williams of Moneyfacts, an independent mortgage market monitor.

“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 per cent last week, we had recorded increases of 0.06 and 0.05 per cent to the average overall two– and five-year fixed rates between January and February. At 2.44 and 2.71 per cent respectively, following four months of consecutive rises, these rates are the highest they have been since August 2021” she continues.

“The 60 per cent LTV tier saw the largest monthly rises, with the two- and five-year averages going up by 0.09 and 0.08 per cent to 1.82 and 2.06 per cent 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.

“February also saw the average SVR rate increase by 0.05 to 4.46 per cent, so those sitting on their lenders’ revert rate may wish to move swiftly to secure a new fixed deal to protect themselves from potential further increases. As the cost of living continues to spiral for consumers, those in a position to consider a new mortgage deal may wish to seek advice sooner rather than later.”