Fewer options for mortgage borrowers as product choice experiences largest decline in over a year

The current climate could pose a challenge for “borrowers who are not quick off the mark”.

The mortgage market remained volatile at the start of this month despite many accurately anticipating the Bank of England’s Monetary Policy Committee (MPC) would lower the UK’s central interest rate in its meeting last week. Product choice saw the biggest month-on-month drop since July 2023, with overall availability falling from 6,645 to 6,402 according to data from the Moneyfacts UK Mortgage Trends Treasury Report.

Not only this, but the report also revealed borrowers have less time to take advantage of an attractive deal; the average shelf-life of a mortgage reduced from 21 to 17 days between October and November, suggesting lenders are acting more quickly to pull products from sale.

Is now a bad time to remortgage?

With the average rate charged by a five-year fixed mortgage rising 0.02 percentage points to 5.09% in the month to November, and the average two-year fix only dropping 0.01 percentage point to sit at 5.39%, some borrowers may still be holding off looking for a new deal.

However, while a reduction to the Bank of England base rate often spurs lenders to review their pricing, there are other factors they must also consider. Rising swap rates in the wake of the Autumn Budget and uncertainty surrounding when the UK’s central interest rate will next be reduced, for instance, could stifle any rate-cutting momentum. Furthermore, with it likely a number of lenders already factored the latest base rate cut into their fixed pricing, it could be some time before mortgage rates fall significantly.

Related Guide: UK base rate explained - and how to respond to changes

Meanwhile, the average Standard Variable Rate (SVR) continues to stand at an eye-watering 7.95% following a marginal, 0.01 percentage point drop at the start of this month.

“There will be many borrowers coming off a cheap rate in the months ahead, so it’s imperative they seek a new offer and not default onto an expensive revert to rate,” explained Rachel Springall, Finance Expert at Moneyfactscompare.co.uk.

Indeed, reverting to a lender’s SVR could prove costly; borrowers who locked into an average five-year fixed deal back in November 2019 (priced at 2.75%) would see their monthly mortgage repayments rise by more than £600 (based on a £200,000 loan repaid over 25 years subject to the average SVR).

In contrast, many of the lowest priced five-year fixed mortgages currently available to refinance customers sit below the 4% threshold and would add less than £150 to your monthly bill (based on the same loan and term).

What about first-time buyers?

The only corner of the mortgage market to buck the trend were products catering to 95% loan-to-value (LTV); availability in this sector saw a slight uptick from 351 in October to 358 by November. What’s more, average two- and five-year fixed rates at this ratio fell month-on-month.

This may offer first-time buyers some consolation, with fixed rates forecast to rise next year and the nil-rate threshold for stamp duty set to drop from £425,000 to £300,000 in the spring.

“It’s evident then, that new buyers will want to rush to make this window of opportunity, but this will be a hurdle if they have not accumulated a hefty deposit,” said Springall, highlighting that “mortgage affordability remains a key issue”.

Borrowers concerned about affordability would be wise to seek advice from a mortgage broker. And, whether you’re a first-time buyer, remortgage borrower or looking to move home, it may be necessary to act quickly should further deals be withdrawn.

“As we have seen over the past month, mortgage deals are never guaranteed to last very long, and should this situation prolong, it poses a challenge for borrowers who are not quick off the mark,” Springall concluded.

Should you speak to a mortgage broker?

Mortgage brokers remove a lot of the paperwork and hassle of getting a mortgage, as well as helping you access exclusive products and rates that aren’t available to the public. Mortgage brokers are regulated by the Financial Conduct Authority (FCA) and are required to pass specific qualifications before they can give you advice.

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