More than 500 mortgage deals have been made unavailable by building societies and banks over the last month, with home buyers being left with no other choice than to take on mortgages with high-interest rates.

According to Moneyfacts, an institution that provides financial information services, when compared with data from the beginning of February, there were a whopping 518 fewer deals available at the beginning of March.

This indicates the biggest monthly drop in mortgage deal availability since May 2020, when, as a result of the COVID-19 pandemic and the economic uncertainty it brought, a massive 626 mortgage products were dropped.

The current number of mortgage products on the market for buyers to choose from is 4,838, which indicates a drop of 384 products from March 2020, when the pandemic first hit.

Lenders have removed these products as a direct response to the increased base rate set by the Bank of England. Some lenders have removed whole products from the market, while others have stopped lending for certain deposit sizes.

Further to this, the shelf life of some mortgage products has been reduced by 14 days over the last month, meaning potential home buyers have, on average, just 28 days to secure their preferred mortgage deal.

For five months in a row, both two-year and five-year fixed-rate mortgage interest rates have risen by 0.21% and 0.17%, respectively. The two-year fixed average rate, at 2.65%, is the highest seen since November 2015.

This is not good news for homeowners coming to the end of their two-year fixed-rate mortgage deal, who will find it extremely challenging to find another fixed deal at a decent interest rate, and they will find it virtually impossible to get a better one than they have previously enjoyed. This will become particularly relevant if the homeowner has little to no equity in their property, thereby making it difficult to access a higher LTV (loan-to-value) band and more competitive interest rates.

Five-year fixed-interest mortgage rates are showing their highest figures, at 2.88%, since April 2019. Homeowners approaching the end of their fixed rate deal may still have the opportunity to find a decent deal on a five-year fixed rate, as the average rate has stayed at 2.93%, which is 0.05% lower than what it was in March 2017.

The only mortgage products that showed signs of improved availability were 5% deposit loans, with seven new deals being added to the market. March 2022 was the first time that a 5% mortgage with a two-year fixed interest rate has shown an increase of 0.06% up to 3.11% since April 2021.

Even though the base rate set by the Bank of England has no direct effect on fixed interest rates, lenders typically increase their rates to cover any increased borrowing costs that will most definitely arise.

Last summer saw mortgage interest rates hit a historical low, with interest rate deals available at as little as 0.83%. This was largely due to lenders wanting to capitalise on a buoyant market and the fact that lending costs were at an all-time low, with the Bank of England lowering the base rate to 0.1%. This was subsequently increased to 02% in December, followed by another increase in February 2022, to 0.5%, with the expectation that further rises will be seen in the months to come.

Eleanor Williams, a finance expert at Moneyfacts, said: ‘Borrowers contemplating securing a new mortgage deal may be disheartened to see that rates are continuing to rise this month.

‘While factors beyond lenders’ control are uncertain, as the cost of living crisis continues and economic conditions are volatile, to mitigate the risk of default, it could be that providers may tighten their lending belts even further moving forward.

‘Borrowers looking to get onto the property ladder or to remortgage may therefore be wise to seek advice to ensure they are abreast of the changing market and to move forward with securing the most suitable deal for them.’

Finding a good fixed-interest deal

There are still many decent fixed-term deals out there that are significantly lower than the average figures provided by Moneyfacts, particularly for clients with large deposits and/or equity in their property. Experts warn buyers to consider their options carefully and shop around to find the best deal before committing to any fixed-rate mortgage product.

“Rates have gone up, which will cost homebuyers a little bit more, but I want to stress that this shouldn’t put people off moving to the house of their dreams or taking that first step to get on the property ladder.

‘We’ve seen a sharp and slightly panicky reaction to the Bank of England base rate rising to 0.5 per cent in February, but 30 years ago, in 1992, it was more than 20 times higher at 10.38 per cent. So, we must view this rise with some much-needed context and with a cool head.’

Even though mortgage interest rates are still relatively low when compared with historical figures, the average house price is increasing but not in line with the average income.

With the upcoming changes to EPC (Energy Performance Certificate) rules, interest in green mortgages is on the increase, with many landlords qualifying for great deals on BTL mortgages.

Green mortgages offer incentives to landlords who are willing to upgrade their properties to a high energy efficiency level.

Although there are currently only a few lenders offering green mortgages, there is an expectation that many more lenders will follow suit in the near future. Green mortgages are available, not only to buy-to-let landlords but also to regular home buyers and those looking to remortgage. Buyers are offered a discount on interest rates for homes that are deemed to be energy efficient.

The first green mortgages were offered in June 2021 by specialist BTL lenders, Land bay. The response from buyers and landlords has been extremely positive, with the prediction that many more lenders intend to offer the same type of mortgage product in the near future.

What is an EPC?

An Energy Performance Certificate is a certificate that measures just how energy efficient a property is, which is then awarded a rating ranging from A to G, with A being the most efficient and G the least efficient.

A property that is highly efficient and emits minimal greenhouse gases will be assigned a rating of A, whereas a G rating indicates poor performance in both efficiency and emissions.

An EPC rating inspection is carried out by a qualified energy assessor, who will estimate the average energy use. The assessor will take into account things like hot water, electricity, and gas costs, as well as levels of carbon dioxide emissions when rating a property.

Energy Performance Certificates also suggest improvements that can be made to improve efficiency, with an estimate of the costs of the changes needed and the potential savings the improvements will bring.

EPC’s for rental properties

Rental properties have been required to have an EPC since 2007, resulting in the government now having energy data for around 50% of residential homes in the UK.

Approximately 58% of houses and flats have an energy-efficient rating between D and G. This is largely due to the large number of old houses in the UK and is not surprising when considering that around 20% of all housing was built before 1919.

In direct contrast, 95% of new homes in the UK have ratings between A and C, with the majority having a rating of B.

Landlords have been required, since 2018, to have a minimum EPC rating of E, but new government rules mean that this will change by 2025 when landlords will be required to improve to a C rating for all new tenancies. This will be followed by all existing tenancies reaching the same C rating by 2028.

The changes are due to the ongoing global warming crisis and are part of the government’s strategy to reach the environmental target of zero emissions by 2050. Housing is estimated to contribute 16% of total carbon dioxide emissions, making it imperative that all homes are improved when it comes to energy efficiency, irrespective of whether they are owned or rented.

For landlords to qualify for a discounted green mortgage, the property must have a rating of at least C. Green mortgages are also available for new-build homes.

How can I improve energy efficiency in my property?

There are a few simple things you can do to improve energy efficiency and lower carbon emissions in your home. You can make small changes, like changing lightbulbs, or bigger improvements, such as new double glazing, floor and wall insulation, and solar panels, all of which are highly effective.

The gas boiler is the biggest problem when it comes to carbon dioxide emissions, which can be improved by upgrading to a combination boiler or heat pumps, which are considerably more environmentally friendly than the old-style boilers.

According to a report by the Equity Release Council, the number of people expecting to have paid off their mortgages by retirement age is set to significantly decrease in the future. Five thousand participants took part in the study, carried out by the lifetime mortgage trade body, which found that 45% of homeowners under the age of 40 and 29% of those over 40 purchased homes a lot later than they had expected or would have liked to.

The research shows that a third of all homeowners are not confident that they will be able to completely pay off their mortgages by retirement age. Many have completely ruled it out, with 20% feeling that a mortgage-free retirement is completely unrealistic and unachievable.

The report suggests that buyers under 40 are less concerned that they may still be in debt after retirement. Jim Boyd, ERC chief executive, said, “There are clear signs that paying a mortgage in retirement is no longer a taboo.”

He added, ‘One in four mortgaged homeowners said they don’t mind if they are still paying off their loan in later life, while 47 per cent believe their generation’s attitude to debt in later life is more accepting than their parents’.

The research showed that 70% of people with mortgages were comfortable with the level of their mortgage debt, increasing to 75% among the over-50s. Many stated that they felt that taking out a mortgage later in life could significantly benefit them, with nearly one-third suggesting that it may improve their overall lifestyle. Just under one-third of participants felt that it could help them access funds to help out family members.

“Lifetime and retirement mortgages allow people to make the most of property as a source of wealth as well as a home. Our findings suggest later life lending products are likely to be even more important for future generations of retired homeowners than they are today.”

Will Hale, chief executive of equity release advisers Key, said: “While the challenges around homeownership for the younger generations are deep-rooted, the later-life lending industry can be part of the solution.

“The relevance of products such as lifetime mortgages is clear. Attitudes towards debt are changing, and with products now available that offer low rates alongside flexible features and important customer protections, we need to ensure that older people and their families understand all their options and are able to access specialist advice to ensure the right outcomes for their individual circumstances.”

Claire Singleton, chief executive of Legal & General Home Finance, said she was “unsurprised” that borrowers are generally more comfortable carrying mortgage debt into their sixties and seventies. “We know that the increasingly flexible range of products, such as optional payment lifetime mortgages, where customers can opt to pay the interest on their loan, is helping to make later-life borrowing a good choice for many customers.

“For some homeowners, their property is now their most significant asset. Half of homeowners across England and Wales could unlock an average of £72,988 from their homes—above the average pension pot of £61,930. With the right advice, later-life lending can help people make the best use of their property wealth.”

Startling data published by the government’s independent forecasting unit indicates that homeowners could be headed for the biggest mortgage interest hike seen since 2008.

By 2023, overall interest payable on a mortgage could increase by as much as 13%.

Members of the Liberal Democrat Party have warned that for homebuyers with an average mortgage of £211,000, the increase would constitute an additional £500 in interest payments per year. However, investment firm AJ Bell said that the costs could be even steeper for those with larger mortgages, who may be looking at £1,000 more every year in interest payments.

Interest rates remain at historic lows

For the time being, Bank of England base rates are being held at an all-time low of 0.1%. But both the Bank of England and the UK’s leading economists have warned that significant increases to base rates over the coming year are inevitable.

Specifically, the consensus now points to an initial increase of 0.25%, followed by a further three increases of the same amount to take base rates back to 1% by the end of next year.

In response, many major lenders are already beginning to withdraw their most competitive mortgage deals from their offerings. Brokers have reported major shifts in the mortgage lending market across the UK, with a wide variety of price shifts having taken place during the last few days alone.

The Office for Budget Responsibility data now points to significant year-on-year increases in mortgage interest payments, which could see homeowners facing an increase in costs next year of around 5.6%. This is then predicted to increase to around 13% in 2023, after which it will return to 5.4% in 2024.

The upcoming hike would be the biggest recorded since 2008, potentially leaving millions of homeowners out of pocket.

Higher costs for all mortgage payers

The figures have become a major political point of contention, with the potential costs for all mortgage payers having been highlighted by the Liberal Democrats.

Commenting on the predicted hikes, the party stated that the average mortgage payer at a variable rate of 3.6% would be looking at around £42 per month in additional interest payments, or £510 per year. Those with fixed-rate home loans at 2% would be liable for an additional £25 monthly payment, adding up to £300 per year.

“This ghastly forecast should send a shiver down the chancellor’s spine,” said Sir Ed Davey, Liberal Democrat leader.

Speaking on behalf of AJ Bell, their head of personal finance predicted even greater costs for mortgage payers over the coming years.

“Someone with £250,000 of borrowing who fixed earlier this year and renewed in 2023 would see £600 a year added to their mortgage costs, while someone with £450,000 of borrowing would see their costs hike by £1,068 a year,” she said.